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Financial skeptic

Notes on "neoliberalism enforced" cruise to Frugality Island for 401K Lemmings

News Neoliberalism as a New Form of Corporatism Recommended Links Peak cheap Energy and Oil Price Slump Secular Stagnation under Neoliberalism Rational Fools vs. Efficient Crooks: The efficient m hypothesis Casino Capitalism
Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime Neoliberal Attacks on Social Security Unemployment Inflation vs. Deflation Coming Bond Squeeze Notes on 401K plans Vanguard
401K Investing Webliography Retirement scams Stock Market as a Ponzy scheme Financial Sector Induced Systemic Instability Neoclassical Pseudo Theories The Great Stagnation Investing in Vanguard Mutual Funds and ETFs
OIL ETNs Peak Cheap Energy and Oil Price Slump Notes on 100-your age investment strategy behavior in rigged markets Chasing a trade The Possibility Of No Mean Reversion Junk Bonds For 401K Investors Tax policies
John Kenneth Galbraith The Roads We Take Economics Bookshelf Who Rules America Financial Quotes Financial Humor Etc

“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. They are ideological. Like a country which adopted a certain religion follows a certain path, The USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

Still I hope it plays a small but important role: to warn about excessive risk taking by 401K investors in neoliberal economic system. It designed to serve as a warning sign and inject a skeptical note into MSM coverage. There are not many such sites, so a warning about danger of taking excessive risk in 401K accounts under neoliberalism has definite value. The following cartoon from 2008 illustrated this point nicely

As far as I know lot of 401K investors are 100% or almost 100% invested at stocks. Including many of my friends. I came across a very relevant to this situation joke which nicely illustrated the ideas of this page:

Seven habits that help produce the anything-but-efficient markets that rule the world by Paul Krugman in Fortune.

1. Think short term.
2. Be greedy.
3. Believe in the greater fool
4. Run with the herd.
5. Overgeneralize
6. Be trendy
7. Play with other people's money

I would like to stress again that it is very difficult to "guess" when the next wave of crisis stikes us: "A thing long expected takes the form of the unexpected when at last it comes".

But mispricing of risk in 401K accounts is systemic for "overbullish" 401 investors, who expect that they will be able to jusp of the train in time, before the crash. Usually such expectations are false. And to sell in the market that can lose 10% in one day is not easy psychologically. I remember my feelings in 2001-2002 and again 2008-2009. That's why many people who planned to "jump" stay put and can temporarily lose 30 to 50% of value of their 401k account in a very short period of time (and if you think that S&P500 can't return to 1000, think again; its all depends on FED). At this point some freak out and sell their holdings making paper losses permanent.

Even for those who weathered the storm and held to their stock holdings, it is important to understand that paper losses were eliminated mostly by Fed money printing. As such risks remains as at one point FED might find itself out of ammunition. The fact that S&P500 recovered very nicely it does not diminish the risk of such behavior. There is no guarantee that the third crisis will behave like previous two.

Next crash will have a new key determinant: the attitude toward the US government (and here I mean the current government of Barack Obama) and Wall Street after 2008 is the lack of trust. That means that you need to hope for the best but prepare for the worst. Injection on so much money into financial system was a novel experiment which is not ended yet. So how it will end is anybody's guess. We are now in uncharted waters. I think when Putin called Bernanke a hooligan, he meant exactly this. Since Bernanke was printing money out of thin air to buy financial paper, his action were tantamount to shoplifting. In some way this probably is more similar to running meth labs inside Fed building. The system was injected with narcotics. Everybody felt better, but the mechanism behind it was not healthy.

The complexity of modern financial system is tremendous and how all those new financial instruments will behave under a new stress is unknown. At the same time in the Internet age we, the great unwashed masses, can't be keep in complete obscurity like in good old time. Many now know ( or at least suspect ) that the neoliberal "show must goes on" after 2008 is actually going strongly at their expense. And while open rebellion is impossible, that results in lack of trust which represents a problem for financial oligarchy which rules the country. The poor working slobs are told be grateful for Walmart's low (poverty-subsidized) prices. Middle class is told that their declining standard of living is a natural result of their lack of competitiveness in the market place. Classic "bread and circuses" policy still works but for how long it will continue to work it is unclear.

But nothing is really new under the sun. To more and more people it is now clear that today the US is trying to stave off the inevitable decline by resorting to all kinds of financial manipulations like previous empires; yesterday, it was the British Empire and if you go further back, you get the USSR, Hapsburg empire, Imperial Russia, Spanish empire, Venetian empire, Byzantium and Roman empire. The current "Secretary of Imperial Wars" (aka Secretary of Defense) Ashton Baldwin Carter is pretty open about this:

“We already see countries in the region trying to carve up these markets…forging many separate trade agreements in recent years, some based on pressure and special arrangements…. Agreements that…..leave us on the sidelines. That risks America’s access to these growing markets. We must all decide if we are going to let that happen. If we’re going to help boost our exports and our economy…and cement our influence and leadership in the fastest-growing region in the world; or if, instead, we’re going to take ourselves out of the game.”

For the US elite it might be a time to rethink its neocon stance due to which the US is exposing ourselves to the enmity of the rising economic powers, and blowing serious cash to maintain it hegemony via maintaining huge military budget, financing wars and color revolutions in distant countries. In a way the US foreign policy became a financial racket, and racket can't last forever because it incite strong opposition from other countries.

Neoliberalism (aka casino capitalism) as a social system entered the state of decline after 2008. Like communism before it stopped to be attractive to people. But unlike communism it proved to have greater staying power, surviving in zombie state as finanfial institutions preserved political power and in some cases even enhanced it. It is unclear how long it will say in this state. Much depends on the availability of "cheap oil" on which neoliberal globalization is based.

But the plausible hypothesis is that this social system like socialism in xUSSR space before entered down slope and might well be on its way to the cliff. Attempts to neo-colonize other states by the West became less successful and more costly (Compare Ukraine, Libya and Iraq with previous instances of color revolutions). Some became close to XIX century colonial conquests with a lot of bloodshed (from half million to over a million of Iraqis, by different estimates, died ). As always this is mainly the blood of locals, which is cheap.

Libya and Ukraine are two recent examples. Both countries are now destroyed (which might be the plan). In Ukraine population is thrown in object poverty with income of less that $5 a day for the majority of population. And there is no other way to expand markets but to try to "neo-colonize" new countries by putting them into ominous level of debt while exporting goods to the population on credit. That is not a long term strategy as Greece, Bulgaria, and now Spain and Portugal had shown. With shrinking markets stability of capitalism in general and neoliberalism in particular might decrease.

Several researchers points to increased importance Central banks now play in maintaining of the stability of the banking system. That's already a reversal of neoliberal dogma about free (read "unregulated") markets. Actually the tale about "free markets", as far as the USA is concerned, actually was from the very beginning mainly the product designed for export (read about Washington consensus).

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[Feb 27, 2017] Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

Feb 27, 2017 | economistsview.typepad.com
JF said in reply to pgl... February 24, 2017 at 11:45 AM

, 2017 at 11:45 AM
Yes, profits are a form of income, but at that point they indirectly touch wealth accumulation and sharing, and before that they fuel wages for managers of capital and have historically been a measure that influence the price of stock, an indirect touch on wealth accumulation. We know what has happened to basic wages/salaries, no reason to expect they would get to share in the gains of further tax cuts, so let us face it, as you note, huge drops in the tax rate on profits will directly benefit wealth and high income people (though not because they would have earned it other than by lobbying).

So ok, harmonize rates with OECD, but offset revenue losses on the personal income tax side so at least some of the upward redistribution is in that proscribed tax base (which does not tax wealth, per the Pollack decision of the Court).

Know you know this, hope other readers get this too.

RC AKA Darryl, Ron said in reply to pgl... , February 24, 2017 at 10:00 AM
In 1913 the personal exemption was $3K for singles and $4K for married couples and the tax rate was just 1% for the first $20K of income. The highest bracket was $500K with a 7% income tax rate. We started off on the correct foot anyway.

https://www.irs.gov/uac/soi-tax-stats-historical-table-23

DrDick -> RC AKA Darryl, Ron... , February 24, 2017 at 11:47 AM
Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

https://en.wikipedia.org/wiki/Revenue_Act_of_1913

RC AKA Darryl, Ron said in reply to DrDick... , February 24, 2017 at 12:34 PM
True. "We started off on the correct foot" was in no way meant to imply that we were on our feet at all today. Back then what you and I make today in relative terms would have put us in the 1% tax bracket and people making $20 million or more today would have been taxed in the top bracket which was taxed at a rate seven times higher than ours.

[Feb 27, 2017] If profits are not income then somebody should explain to me why all of business, finance, analysts, and almost all of institutional and private society are obsessed, sometimes to a pathological degree, with increasing them

Feb 27, 2017 | economistsview.typepad.com
cm -> Peter K.... February 25, 2017 at 12:19 AM , 2017 at 12:19 AM
If profits are not income then somebody should explain to me why all of business, finance, analysts, and almost all of institutional and private society are obsessed, sometimes to a pathological degree, with increasing them.

[Feb 27, 2017] Leoliberal privitization of eduction went way too far

Feb 27, 2017 | economistsview.typepad.com

anne : February 24, 2017 at 05:00 PM , 2017 at 05:00 PM

https://www.nytimes.com/2017/02/23/upshot/dismal-results-from-vouchers-surprise-researchers-as-devos-era-begins.html

February 23, 2017

Dismal Voucher Results Surprise Researchers as DeVos Era Begins
By Kevin Carey

The confirmation of Betsy DeVos as secretary of education was a signal moment for the school choice movement. For the first time, the nation's highest education official is someone fully committed to making school vouchers and other market-oriented policies the centerpiece of education reform.

But even as school choice is poised to go national, a wave of new research has emerged suggesting that private school vouchers may harm students who receive them. The results are startling - the worst in the history of the field, researchers say.

While many policy ideas have murky origins, vouchers emerged fully formed from a single, brilliant essay * published in 1955 by Milton Friedman, the free-market godfather later to be awarded a Nobel Prize in Economics. Because "a stable and democratic society is impossible without widespread acceptance of some common set of values and without a minimum degree of literacy and knowledge on the part of most citizens," Mr. Friedman wrote, the government should pay for all children to go to school.

But, he argued, that doesn't mean the government should run all the schools. Instead, it could give parents vouchers to pay for "approved educational services" provided by private schools, with the government's role limited to "ensuring that the schools met certain minimum standards."

The voucher idea sat dormant for years before taking root in a few places, most notably Milwaukee. Yet even as many of Mr. Friedman's other ideas became Republican Party orthodoxy, most national G.O.P. leaders committed themselves to a different theory of educational improvement: standards, testing and accountability. That movement reached an apex when the No Child Left Behind Act of 2001 brought a new focus on tests and standards to nearly every public school nationwide. The law left voucher supporters with crumbs: a small demonstration project in Washington, D.C.

But broad political support for No Child Left Behind proved short-lived. Teachers unions opposed the reforms from the left, while libertarians and states-rights conservatives denounced it from the right. When Republicans took control of more governor's mansions and state legislatures in the 2000s, they expanded vouchers to an unprecedented degree. Three of the largest programs sprang up in Indiana, Louisiana and Ohio, which collectively enroll more than a third of the 178,000 voucher students nationwide.

Most of the new programs heeded Mr. Friedman's original call for the government to enforce "minimum standards" by requiring private schools that accept vouchers to administer standardized state tests. Researchers have used this data to compare voucher students with similar children who took the same tests in public school. Many of the results were released over the last 18 months, while Donald J. Trump was advocating school choice on the campaign trail.

The first results came in late 2015....

* http://la.utexas.edu/users/hcleaver/330T/350kPEEFriedmanRoleOfGovttable.pdf

anne -> anne... , February 24, 2017 at 05:00 PM
http://la.utexas.edu/users/hcleaver/330T/350kPEEFriedmanRoleOfGovttable.pdf

1955

The Role of Government in Education
By Milton Friedman

The general trend in our times toward increasing intervention by the state in economic affairs has led to a concentration of attention and dispute on the areas where new intervention is proposed and to an acceptance of whatever intervention has so far occurred as natural and unchangeable. The current pause, perhaps reversal, in the trend toward collectivism offers an opportunity to reexamine the existing activities of government and to make a fresh assessment of the activities that are and those that are not justified. This paper attempts such a re-examination for education.

Education is today largely paid for and almost entirely administered by governmental bodies or non-profit institutions. This situation has developed gradually and is now taken so much for granted that little explicit attention is any longer directed to the reasons for the special treatment of education even in countries that are predominantly free enterprise in organization and philosophy. The result has been an indiscriminate extension of governmental responsibility.

The role assigned to government in any particular field depends, of course, on the principles accepted for the organization of society in general. In what follows, I shall assume a society that takes freedom of the individual, or more realistically the family, as its ultimate objective, and seeks to further this objective by relying primarily on voluntary exchange among individuals for the organization of economic activity. In such a free private enterprise exchange economy, government's primary role is to preserve the rules of the game by enforcing contracts, preventing coercion, and keeping markets free. Beyond this, there are only three major grounds on which government intervention is to be justified. One is "natural monopoly" or similar market imperfection which makes effective competition (and therefore thoroughly voluntary ex change) impossible. A second is the existence of substantial "neighborhood effects," i.e., the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible to make them compensate him-- circumstances that again make voluntary exchange impossible. The third derives from an ambiguity in the ultimate objective rather than from the difficulty of achieving it by voluntary exchange, namely, paternalistic concern for children and other irresponsible individuals. The belief in freedom is for "responsible" units, among whom we include neither children nor insane people. In general, this problem is avoided by regarding the family as the basic unit and therefore parents as responsible for their children; in considerable measure, however, such a procedure rests on expediency rather than principle. The problem of drawing a reasonable line between action justified on these paternalistic grounds and action that conflicts with the freedom of responsible individuals is clearly one to which no satisfactory answer can be given.

In applying these general principles to education, we shall find it helpful to deal separately with (1) general education for citizen ship, and (2) specialized vocational education, although it may be difficult to draw a sharp line between them in practice. The grounds for government intervention are widely different in these two areas and justify very different types of action....

[Feb 27, 2017] Stents for stable patients prevent zero heart attacks and extend the lives of patients a grand total of not at all

Notable quotes:
"... Stents for stable patients prevent zero heart attacks and extend the lives of patients a grand total of not at all. ..."
"... It found that atenolol didn't prevent heart attacks or extend life at all; it just lowered blood pressure. ..."
"... Of course, myriad medical innovations improve and save lives, but even as scientists push the cutting edge (and expense) of medicine, the National Center for Health Statistics reported last month that American life expectancy dropped, slightly. There is, though, something that does powerfully and assuredly bolster life expectancy: sustained public-health initiatives... ..."
Feb 27, 2017 | economistsview.typepad.com
im1dc : February 26, 2017 at 11:18 AM , 2017 at 11:18 AM
If you are looking for a World Class Global Scam - you found it documented below

"Stents for stable patients prevent zero heart attacks and extend the lives of patients a grand total of not at all"

My takeaway: There are HERO Physicians doing WORLD CLASS MEDICINE (read article) but they are greatly outnumbered by those who put the health of their wallet ahead of patient health...so beware and be aware

https://www.propublica.org/article/when-evidence-says-no-but-doctors-say-yes

"When Evidence Says No, But Doctors Say Yes"

'Years after research contradicts common practices, patients continue to demand them and doctors continue to deliver. The result is an epidemic of unnecessary and unhelpful treatment'

by David Epstein, ProPublica...February 22, 2017

*This story was co-published with The Atlantic

"The 21st Century Cures Act - a rare bipartisan bill, pushed by more than 1,400 lobbyists and signed into law in December - lowers evidentiary standards for new uses of drugs and for marketing and approval of some medical devices. Furthermore, last month President Donald Trump scolded the FDA for what he characterized as withholding drugs from dying patients. He promised to slash regulations "big league. It could even be up to 80 percent" of current FDA regulations, he said. To that end, one of the president's top candidates to head the FDA, tech investor Jim O'Neill, has openly advocated for drugs to be approved before they're shown to work. "Let people start using them at their own risk," O'Neill has argued.

Stents for stable patients prevent zero heart attacks and extend the lives of patients a grand total of not at all.

So, while Americans can expect to see more drugs and devices sped to those who need them, they should also expect the problem of therapies based on flimsy evidence to accelerate...

...it's not hard to understand why Sir James Black won a Nobel Prize largely for his 1960s discovery of beta-blockers, which slow the heart rate and reduce blood pressure. The Nobel committee lauded the discovery as the "greatest breakthrough when it comes to pharmaceuticals against heart illness since the discovery of digitalis 200 years ago." In 1981, the FDA approved one of the first beta-blockers, atenolol, after it was shown to dramatically lower blood pressure. Atenolol became such a standard treatment that it was used as a reference drug for comparison with other blood-pressure drugs.

In 1997, a Swedish hospital began a trial of more than 9,000 patients with high blood pressure who were randomly assigned to take either atenolol or a competitor drug that was designed to lower blood pressure for at least four years. The competitor-drug group had fewer deaths (204) than the atenolol group (234) and fewer strokes (232 compared with 309). But the study also found that both drugs lowered blood pressure by the exact same amount, so why wasn't the vaunted atenolol saving more people? That odd result prompted a subsequent study, which compared atenolol with sugar pills. It found that atenolol didn't prevent heart attacks or extend life at all; it just lowered blood pressure. A 2004 analysis of clinical trials - including eight randomized controlled trials comprising more than 24,000 patients - concluded that atenolol did not reduce heart attacks or deaths compared with using no treatment whatsoever; patients on atenolol just had better blood-pressure numbers when they died...

...Replication of results in science was a cause-célèbre last year, due to the growing realization that researchers have been unable to duplicate a lot of high-profile results. A decade ago, Stanford's Ioannidis published a paper warning the scientific community that "Most Published Research Findings Are False." (In 2012, he coauthored a paper showing that pretty much everything in your fridge has been found to both cause and prevent cancer - except bacon, which apparently only causes cancer.) Ioannidis's prescience led his paper to be cited in other scientific articles more than 800 times in 2016 alone. Point being, sensitivity in the scientific community to replication problems is at an all-time high...

Of course, myriad medical innovations improve and save lives, but even as scientists push the cutting edge (and expense) of medicine, the National Center for Health Statistics reported last month that American life expectancy dropped, slightly. There is, though, something that does powerfully and assuredly bolster life expectancy: sustained public-health initiatives...

"Relative risk is just another way of lying."

At the same time, patients and even doctors themselves are sometimes unsure of just how effective common treatments are, or how to appropriately measure and express such things. Graham Walker, an emergency physician in San Francisco, co-runs a website staffed by doctor volunteers called the NNT that helps doctors and patients understand how impactful drugs are - and often are not. "NNT" is an abbreviation for "number needed to treat," as in: How many patients need to be treated with a drug or procedure for one patient to get the hoped-for benefit? In almost all popular media, the effects of a drug are reported by relative risk reduction. To use a fictional illness, for example, say you hear on the radio that a drug reduces your risk of dying from Hogwart's disease by 20 percent, which sounds pretty good. Except, that means if 10 in 1,000 people who get Hogwart's disease normally die from it, and every single patient goes on the drug, eight in 1,000 will die from Hogwart's disease. So, for every 500 patients who get the drug, one will be spared death by Hogwart's disease. Hence, the NNT is 500. That might sound fine, but if the drug's "NNH" - "number needed to harm" - is, say, 20 and the unwanted side effect is severe, then 25 patients suffer serious harm for each one who is saved. Suddenly, the trade-off looks grim.

Now, consider a real and familiar drug: aspirin. For elderly women who take it daily for a year to prevent a first heart attack, aspirin has an estimated NNT of 872 and an NNH of 436. That means if 1,000 elderly women take aspirin daily for a decade, 11 of them will avoid a heart attack; meanwhile, twice that many will suffer a major gastrointestinal bleeding event that would not have occurred if they hadn't been taking aspirin. As with most drugs, though, aspirin will not cause anything particularly good or bad for the vast majority of people who take it. That is the theme of the medicine in your cabinet: It likely isn't significantly harming or helping you. "Most people struggle with the idea that medicine is all about probability," says Aron Sousa, an internist and senior associate dean at Michigan State University's medical school. As to the more common metric, relative risk, "it's horrible," Sousa says. "It's not just drug companies that use it; physicians use it, too. They want their work to look more useful, and they genuinely think patients need to take this [drug], and relative risk is more compelling than NNT. Relative risk is just another way of lying."

A Different Way to Think About Medicine

For every 100 older adults who take a sleep aid, 7 will experience improved sleep, while 17 will suffer side effects that range widely in severity, from simple morning "hangover" to memory loss and serious accidents. As with many medications, most who take a sleep aid will experience neither benefit nor harm...

"There's this cognitive dissonance, or almost professional depression," Walker says. "You think, 'Oh my gosh, I'm a doctor, I'm going to give all these drugs because they help people.' But I've almost become more fatalistic, especially in emergency medicine." If we really wanted to make a big impact on a large number of people, Walker says, "we'd be doing a lot more diet and exercise and lifestyle stuff. That was by far the hardest thing for me to conceptually appreciate before I really started looking at studies critically."...

In the 1990s, the American Cancer Society's board of directors put out a national challenge to cut cancer rates from a peak in 1990. Encouragingly, deaths in the United States from all types of cancer since then have been falling. Still, American men have a ways to go to return to 1930s levels. Medical innovation has certainly helped; it's just that public health has more often been the society-wide game changer. Most people just don't believe it.

In 2014, two researchers at Brigham Young University surveyed Americans and found that typical adults attributed about 80 percent of the increase in life expectancy since the mid-1800s to modern medicine. "The public grossly overestimates how much of our increased life expectancy should be attributed to medical care," they wrote, "and is largely unaware of the critical role played by public health and improved social conditions determinants." This perception, they continued, might hinder funding for public health, and it "may also contribute to overfunding the medical sector of the economy and impede efforts to contain health care costs."

It is a loaded claim. But consider the $6.3 billion 21st Century Cures Act, which recently passed Congress to widespread acclaim. Who can argue with a law created in part to bolster cancer research? Among others, the heads of the American Academy of Family Physicians and the American Public Health Association. They argue against the new law because it will take $3.5 billion away from public-health efforts in order to fund research on new medical technology and drugs, including former Vice President Joe Biden's "cancer moonshot." The new law takes money from programs - like vaccination and smoking-cessation efforts - that are known to prevent disease and moves it to work that might, eventually, treat disease. The bill will also allow the FDA to approve new uses for drugs based on observational studies or even "summary-level reviews" of data submitted by pharmaceutical companies. Prasad has been a particularly trenchant and public critic, tweeting that "the only people who don't like the bill are people who study drug approval, safety, and who aren't paid by Pharma."..."

[Feb 27, 2017] Why Markets Can't Cure Healthcare

Feb 27, 2017 | economistsview.typepad.com
anne -> anne... February 26, 2017 at 02:07 PM , 2017 at 02:07 PM
http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/

July 25, 2009

Why Markets Can't Cure Healthcare
By Paul Krugman

Judging both from comments on this blog and from some of my mail, a significant number of Americans believe that the answer to our health care problems - indeed, the only answer - is to rely on the free market. Quite a few seem to believe that this view reflects the lessons of economic theory.

Not so. One of the most influential economic papers of the postwar era was Kenneth Arrow's "Uncertainty and the Welfare Economics of Health Care," * which demonstrated - decisively, I and many others believe - that health care can't be marketed like bread or TVs. Let me offer my own version of Arrow's argument.

There are two strongly distinctive aspects of health care. One is that you don't know when or whether you'll need care - but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor's office; and very, very few people can afford to pay major medical costs out of pocket.

This tells you right away that health care can't be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. And you can't just trust insurance companies either - they're not in business for their health, or yours.

This problem is made worse by the fact that actually paying for your health care is a loss from an insurers' point of view - they actually refer to it as "medical costs." This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there's a widespread sense that our fellow citizens should get the care we need - not everyone agrees, but most do - this means that private insurance basically spends a lot of money on socially destructive activities.

The second thing about health care is that it's complicated, and you can't rely on experience or comparison shopping. ("I hear they've got a real deal on stents over at St. Mary's!") That's why doctors are supposed to follow an ethical code, why we expect more from them than from bakers or grocery store owners.

You could rely on a health maintenance organization to make the hard choices and do the cost management, and to some extent we do. But HMOs have been highly limited in their ability to achieve cost-effectiveness because people don't trust them - they're profit-making institutions, and your treatment is their cost.

Between those two factors, health care just doesn't work as a standard market story.

All of this doesn't necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful healthcare systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn't work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.

* https://web.stanford.edu/~jay/health_class/Readings/Lecture01/arrow.pdf

anne -> anne... , February 26, 2017 at 02:44 PM
Correcting again and continuing:

Though Krugman always praises the work of Arrow on healthcare markets, Krugman never seems much been influenced by the work.

Though praising Arrow on healthcare markets, Krugman seemingly has spent no time on or possibly has dismissed research affirming Arrow and has not supported the sorts of healthcare insurance systems that would follow from accepting the work of Arrow:

https://promarket.org/there-is-regulatory-capture-but-it-is-by-no-means-complete/
/
March 15, 2016

"There Is Regulatory Capture, But It Is By No Means Complete"
By Asher Schechter

Kenneth J. Arrow, one of the most influential economists of the 20th century, reflects on the benefits of a single payer health care system, the role of government and regulatory capture.

Mr. Bill : , February 26, 2017 at 03:32 PM
So Anne, what your saying is that "health care" is a monopolistic industry that makes more money by restricting care and charging more ? Allowing people that can't afford to live, too die?

Well. yes, I agree with your presumed hypothesis, and I admire your boldness for stepping out in front of this moving freight train, risking your beloved tenure.

To me ? Thanks for asking.

I think that the 3 % administrative costs of the existing single payer system are more pareto optimal than the 25 % that the monopolists' extract. What do I know. This is America. Dumb is not an option.

anne : , February 26, 2017 at 06:33 PM
Turning again to Kenneth Arrow and healthcare markets, assuming that Arrow was correct for all these years, and subsequent research repeatedly has confirmed Arrow, then a typical American market-based healthcare insurance system is going to prove unworkable. Why then has the work of Arrow which is at least superficially so broadly praised by economists not been more influential in forming policy?
libezkova -> anne... , February 26, 2017 at 07:12 PM
"It is difficult to get a man to understand something, when his salary depends on his not understanding it."

― Upton Sinclair, I, Candidate for Governor: And How I Got Licked

[Feb 27, 2017] Kenneth Arrow has died

Feb 27, 2017 | crookedtimber.org
The person who had promoted general equilibrium fallacy and mathiness in economics

Patrick S. O'Donnell 02.22.17 at 3:34 pm

I won't dispute the accolades (and not only because it's in bad taste), especially the long-standing consensus that he was "a very good guy."

All the same, I'm inclined to believe that Arrow's undoubtedly clever if not brilliant "impossibility theorem" (Amartya Sen describes it as a 'result of breathtaking brilliance and power') had, and speaking generally, a pernicious effect on the discipline of economics, captured in part by Deirdre (né Donald) McCloskey's comment that it, along with other qualitative general theorems in the discipline, "do not, strictly speaking, relate to anything an economist would actually want to know," in other words, "axiomatizing economics" (which Arrow alone cannot be held responsible for) was a turn for the worse, no doubt motivated by a desire to bring (natural) scientific respectability and putative "rigor" (of the sort believed to characterize physics) to a field not amenable to same (to put it bluntly if not mildly).

For a different sort of critique of his work in this regard in economics and the "social choice" literature, see Hausman and McPherson's Economic Analysis, Moral Philosophy, and Public Policy (Cambridge University Press, 2nd ed., 2006).

There is also a vigorous critique of the use of this theorem by professional economists and political scientists in S.M. Amadae's Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism (University of Chicago Press, 2003).

Sen has a decidedly more favorable assessment of the "impossibility theorem" in his book, Rationality and Freedom (Belknap Press of Harvard University Press, 2002).

Alas, it was mischievous interpretations and application of his famous "impossibility theorem" that unequivocally did enormous harm to the discipline of political science, particularly with regard to democratic theory (and by implication, praxis as well): see Gerry Mackie's Democracy Defended (Cambridge University Press, 2003). Donald A. Coffin 02.22.17 at 4:16 pm ( 5 )

Links abound of course. For an excellent discussion of his contributions, this (the first of four posts that will appear this week) is a good place to start.
https://afinetheorem.wordpress.com/2017/02/22/the-greatest-living-economist-has-passed-away-notes-on-kenneth-arrow-part-i/
peterv 02.23.17 at 10:57 pm ( pnee:

For us members of the general public, the return of Jobs to Apple was a complete surprise. It was not rumored in any way in any public forum, to my knowledge. The futures for the company considered possible by external observers (ie, non-insiders) were many more than before. Exactly as I said and as you agree, the public announcement of Jobs' return was new information which increased public uncertainty.

Lee A. Arnold 02.24.17 at 11:45 am ( 19 )
"Information" has different definitions in different disciplines. One of Arrow's last lectures explains his use of the word, and also his view of the current state of many other things. Only 9 pages, no math:

http://www.wifo.ac.at/jart/prj3/wifo/resources/person_dokument/person_dokument.jart?publikationsid=47076&mime_type=application/pdf

likbez 02.26.17 at 11:20 pm (

Two questions to esteemed commenters here:

1. Is not the idea of permanent equilibrium a fallacy?

2. If not excessive use of mathematics in economics called mathiness?

[Feb 27, 2017] Offshoring has largely been an automation and IT story.

Notable quotes:
"... US companies were always able to offshore work. Before commodity internet, telecom, and international transport (OK in good part enabled by international trade/etc. deals), that was much more costly. ..."
"... IT has made it possible to effectively manage larger business/institutional aggregate than before on an industrial scale and using industrial management paradigms. Others and I have made that case before. ..."
"... Put yourself in 1980, though. Think about the coordination you can organize. Think about sending components to a low labor cost jurisdiction for assembly. Perhaps paying a tariff and transportation to get there, then a tariff and transportation to get back. The labor is essentially free, but the other is real money. Ten years later the tariffs start to disappear. Containerization continues to drive down transport per unit. ..."
"... Sure, by now the best manufacturers are often foreign. They did not get there without our help. ..."
"... In the case of subsidiaries, this requires international legal frameworks allowing US companies to operate foreign subsidiaries, or buying foreign companies, with low enough overheads ("compliance" etc.) to make distributing work worthwhile. ..."
"... The general sentiment seems to be that people in "low cost geographies" are of lesser quality at least as concerns the subject matter. This is not my experience. What used to lack (as of today I would doubt even that) is years of experience, as the offshoring industry branches hadn't existed in the remote locations, so all you could hire was freshers; or a lag in access to bleeding edge Western technology and research literature. This is no longer the case, and hasn't been the case for about a decade. ..."
"... That IN THEORY, the exchange rate and other prices should adjust to any change in tax or regulatory regime to at least partly offset it. A lot of the practical problems arise, because price adjustments do not actually seem to happen to the extent predicted, and large financial imbalances are seen to become secular features of the economic landscape. ..."
Feb 20, 2017 | economistsview.typepad.com
point : February 20, 2017 at 01:51 PM

"Revoking Trade Deals Will Not Help American Middle Classes."

Brad lives in a world with jump discontinuities in the distribution of expected returns from labor arbitrage. That changing the cost of doing a deal will not reduce or unwind deals because the gains from trade individually exceed any costs that could be imposed. So he can say, elsewhere, the jobs ain't coming back, full stop.

"If the United States had imposed barriers to the construction of intercontinental value chains would the semi-skilled and skilled manufacturing workers of the U.S. be better off?"

Brad does not find any relation between "imposing barriers" and "removing subsidy". Or in establishing the older trade deals, between "removing barriers" and "subsidizing foreign labor". Where the foreign labor operated in a low environmental protection environment, a low labor protection environment, and probably others, it seems enabling US firms to invest in foreign operations to reap the savings of less protection should be seen as subsidy.

RC AKA Darryl, Ron -> point ... February 20, 2017 at 02:12 PM

Your point is well taken. THANKS!

cm -> point.. .

Is enabling and not-preventing the same thing?

US companies were always able to offshore work. Before commodity internet, telecom, and international transport (OK in good part enabled by international trade/etc. deals), that was much more costly.

IMO, offshoring has largely been an automation and IT story.

Likewise domestic/national level business consolidation.

IT has made it possible to effectively manage larger business/institutional aggregate than before on an industrial scale and using industrial management paradigms. Others and I have made that case before.

This is not a new insight, but probably still not an obvious one.

point -> cm...4 , February 21, 2017 at 04:02 AM
Thanks. I'm sure automation and IT contribute.

Put yourself in 1980, though. Think about the coordination you can organize. Think about sending components to a low labor cost jurisdiction for assembly. Perhaps paying a tariff and transportation to get there, then a tariff and transportation to get back. The labor is essentially free, but the other is real money. Ten years later the tariffs start to disappear. Containerization continues to drive down transport per unit.

Point one is that Brad assumes there is no one doing this now who is near break-even and would go upside down with any change in tariff regime, so there is no one to relocate to the USA.

Point two is that we import environmental degradation and below market labor when we allow/encourage these to be part of the ROI calculation through tariff policy.

Sure, by now the best manufacturers are often foreign. They did not get there without our help.

cm -> point... , February 21, 2017 at 11:14 PM
Well, one can argue that environmental improvements credited to regulation were in part exporting environmental degradation, simply by moving polluting production facilities "over there".
cm -> cm... , February 21, 2017 at 11:16 PM
Or building new and better facilities "there", but in either case the old ones were dismantled "here".
cm -> point... , February 20, 2017 at 04:57 PM
E.g. I have seen it in my own work and with many others: companies can farm out any work to foreign subsidiaries or contractors they don't want to keep stateside for some reason. In the case of subsidiaries, this requires international legal frameworks allowing US companies to operate foreign subsidiaries, or buying foreign companies, with low enough overheads ("compliance" etc.) to make distributing work worthwhile.

Considering the case of US vs. Asia - depending on where you are in the US, Asia/PAC (India/Far East/Pacific) business hours are off by about a half day because of time zone effects. To a lesser but similar degree this applies to Europe and the Middle East.

The general sentiment seems to be that people in "low cost geographies" are of lesser quality at least as concerns the subject matter. This is not my experience. What used to lack (as of today I would doubt even that) is years of experience, as the offshoring industry branches hadn't existed in the remote locations, so all you could hire was freshers; or a lag in access to bleeding edge Western technology and research literature. This is no longer the case, and hasn't been the case for about a decade.

Then there is the aspect that people in "some" geographies are more habituated to top-down management styles, talking back less, etc. which may be an advantage or liability depending on what the business requires of them.

reason -> point... , February 21, 2017 at 06:15 AM
I think one thing that is forgotten almost always in such discussions is that the arguments for or against trade start with barter not so much with monetary exchange.

That IN THEORY, the exchange rate and other prices should adjust to any change in tax or regulatory regime to at least partly offset it. A lot of the practical problems arise, because price adjustments do not actually seem to happen to the extent predicted, and large financial imbalances are seen to become secular features of the economic landscape.

This is why I'm inclined to say that trade barriers are a bit of red herring, the really big issues are financial (including the need for finding ways to repair damaged middle class balance sheets). We need to stop seeing redistribution as a dirty word. It is what democratic governments worth the name should be doing.

[Feb 26, 2017] Clowbacks to benefits manager is "It's like crack cocaine," said Susan Hayes, a consultant with Pharmacy Outcomes Specialists in Lake Zurich, Illinois. "They just can't get

Feb 26, 2017 | economistsview.typepad.com
im1dc : February 24, 2017 at 05:26 PM , 2017 at 05:26 PM
Real World Economics

"You're Overpaying for Drugs and Your Pharmacist Can't Tell You"

https://www.bloomberg.com/news/articles/2017-02-24/sworn-to-secrecy-drugstores-stay-silent-as-customers-overpay

"You're Overpaying for Drugs and Your Pharmacist Can't Tell You"

by Jared S Hopkins...February 24, 2017...9:52 AM EST

> Gag clauses stop pharmacists from pointing out a cheaper way

> Cigna, UnitedHealth and Humana face at least 16 lawsuits

"Eric Pusey has to bite his tongue when customers at his pharmacy cough up co-payments far higher than the cost of their low-cost generic drugs, thinking their insurance is getting them a good deal.

Pusey's contracts with drug-benefit managers at his Medicap Pharmacy in Olyphant, Pennsylvania, bar him from volunteering the fact that for many cheap, generic medicines, co-pays sometimes are more expensive than if patients simply pay out of pocket and bypass insurance. The extra money -- what the industry calls a clawback -- ends up with the benefit companies. Pusey tells customers only if they ask.

"Some of them get fired up," he said. "Some of them get angry at the whole system. Some of them don't even believe that what we're telling them is accurate."

Graphic

Clawbacks, which can be as little as $2 a prescription or as much as $30, may boost profits by hundreds of millions for benefit managers and have prompted at least 16 lawsuits since October. The legal cases as well dozens of receipts obtained by Bloomberg and interviews with more than a dozen pharmacists and industry consultants show the growing importance of the clawbacks.

"It's like crack cocaine," said Susan Hayes, a consultant with Pharmacy Outcomes Specialists in Lake Zurich, Illinois. "They just can't get enough."

The cases arrive at a critical juncture in the quarter-century debate over how to make health care more affordable in America. President Donald Trump is promising to lower drug costs, saying the government should get better prices and the pharmaceutical industry is "getting away with murder." The Pharmaceutical Care Management Association, a benefits-manager trade group, says it expects greater scrutiny over its role in the price of medicine and wants to make its case "vocally and effectively."
Racketeering Accusations

Suits have been filed against insurers UnitedHealth Group Inc., which owns manager OptumRx; Cigna Corp., which contracts with that manager; and Humana Inc., which runs its own. Among the accusations are defrauding patients through racketeering, breach of contract and violating insurance laws.

"Pharmacies should always charge our members the lowest amount outlined under their plan when filling prescriptions," UnitedHealthcare spokesman Matthew Wiggin said in a statement. "We believe these lawsuits are without merit and will vigorously defend ourselves."

Mark Mathis, a Humana spokesman, declined to comment. Matt Asensio, a Cigna spokesman, said the company doesn't comment on litigation.

"Patients should not have to pay more than a network drugstore's submitted charges to the health plan," Charles Cote, a spokesman for the Pharmaceutical Care Management Association, said in a statement.

Read more: Escalating U.S. drug prices -- a QuickTake explainer

Benefit managers are obscure but influential middlemen. They process prescriptions for insurers and large employers that back their own plans, determine which drugs are covered and negotiate with manufacturers on one end and pharmacies on the other. They have said their work keeps prices low, in part by pitting rival drugmakers against one other to get better deals.

The clawbacks work like this: A patient goes to a pharmacy and pays a co-pay amount -- perhaps $10 -- agreed to by the pharmacy benefits manager, or PBM, and the insurers who hire it. The pharmacist gets reimbursed for the price of the drug, say $2, and possibly a small profit. Then the benefits manager "claws back" the remainder. Most patients never realize there's a cheaper cash price.

"There's this whole industry that most people don't know about," said Connecticut lawyer Craig Raabe, who represents people accusing the companies of defrauding them. "The customers see that they go in, they are paying a $10 co-pay for amoxicillin, having no idea that the PBM and the pharmacy have agreed that the actual cost is less than a dollar, and they're still paying the $10 co-pay."

On Feb. 10, a customer at an Ohio pharmacy paid a $15 co-pay for 15 milligrams of generic stomach medicine pantoprazole that the pharmacist bought for $2.05, according to receipts obtained by Bloomberg. The pharmacist was repaid $7.22, giving him a profit of $5.17. The remaining $7.78 went back to the benefits manager.
Opaque Market

Clawbacks are possible because benefit managers take advantage of an opaque market, said Hayes, the Illinois consultant. Only they know who pays what.

In interviews, some pharmacists estimate clawbacks happen in 10 percent of their transactions. A survey by the more than 22,000-member National Community Pharmacists Association found 83 percent of 640 independent pharmacists had at least 10 a month.

"I've got three drugstores, so I see a lot of it," David Spence, a Houston pharmacist, said in an interview. "We look at it as theft -- another way for the PBMs to steal."

Lawsuits began in October in multiple states, and some have since been consolidated. Most cite an investigation by New Orleans television station Fox 8, which featured interviews with Louisiana pharmacists whose faces and voices were obscured.
Tight Restrictions

Many plans require pharmacies to collect payment when prescriptions are filled and prohibit them from waiving or reducing the amount. They can't even tell their customers about the clawbacks, according to the suits. Contracts obtained by Bloomberg prohibit pharmacists from publicly criticizing benefit managers or suggesting customers obtain the medication cheaper by paying out of pocket.

Pharmacists who contract with OptumRx in 2017 could be terminated for "actions detrimental to the provider network," doing anything that "disparages" it or trying to "steer" customers to other coverage or discounted plans, according to an agreement obtained by Bloomberg.

"They're usually take-it-or-leave-it contracts," said Mel Brodsky, who just retired as chief executive officer of Pennsylvania's Keystone Pharmacy Purchasing Alliance, which buys drugs on behalf of independent pharmacies.

OptumRx is among the three largest benefit managers that combine to process 80 percent of the prescriptions in the U.S. The other two, Express Scripts Holding Co. and CVS Caremark, haven't been accused of clawbacks. CVS doesn't use them, it said in a statement. Express Scripts is so opposed that it explains the practice on its website and promises customers will pay the lowest price available.
Potential Death Blow

Pharmacies fear getting removed from reimbursement networks, a potential death blow in smaller communities. But some pharmacists jump at opportunities to inform customers who question their co-pay amounts.

"Most don't understand," said Spence, who owns two pharmacies in Houston. "If their co-pay is high, then they care."

States are responding. Last year, Louisiana began allowing pharmacists to tell customers how to get the cheapest price for drugs, trumping contract gag clauses. In 2015, Arkansas prohibited benefit managers and pharmacies from charging customers more than the pharmacy will be paid.

"The consumers don't know what's going on," said Steve Nelson, a pharmacist in Okeechobee, Florida. "We try to educate them with regards to what goes into a prescription, OK? You've got to kind of tip-toe around things."

ilsm -> im1dc... , February 24, 2017 at 07:08 PM
pharma to USG

like drug cartel in Mexico

except no briefcases

im1dc -> ilsm... , February 24, 2017 at 07:47 PM
That's a valid observation.

[Feb 26, 2017] http://www.eschatonblog.com/2017/02/your-moment-of-zen.html

Feb 26, 2017 | www.eschatonblog.com

Hillary's former communications director says all of those crowds protesting Trump don't want a $15 min. wage, it's all about identity. Reply Friday, February 24, 2017 at 06:30 AM RC AKA Darryl, Ron said in reply to Peter K.... [The comments there are a riot:]


thebewilderness • 12 days ago


What possible use could those people have for $15 an hour wage?
Reply Friday, February 24, 2017 at 07:07 AM Chris G said in reply to RC AKA Darryl, Ron... $15 an hour? You know they'd just blow it on cheap hookers, oxy, and Thunderbird... Reply Friday, February 24, 2017 at 08:12 AM RC AKA Darryl, Ron said in reply to Chris G ... :<)

Actually that is more like me back in my mid-twenties after Viet Nam and two divorces. Reply Friday, February 24, 2017 at 09:23 AM RC AKA Darryl, Ron said in reply to Peter K.... I agree.

There are two separate issues, bad pay AND bad jobs in the service economy. Corporatism and the service economy have other ways of sucking than just poor pay. Applebaum gets to "the work is physically demanding and emotionally draining," but then working in coal mines and factories was not exactly uplifting either. So, Applebaum's omissions regarding the minimum wage and the destruction of unions was grievous and wrong. However, corporatism and its assumptions were enough for me to rejoice in being retired, in no small part because my pension income after reductions in work related expenses has kept parity with my former work income. For those less fortunate then mortality may still be the only escape.

I had both good pay and a good job under very strange conditions, working as a state paid worker managed by outsourcer Northrop Grumman reporting in turn to the two best supervisory managers that the program had just for as long as those two lasted. I was a lucky dog right down to the end. My wife has good pay and a series of terrible bosses at a firm with operations confused and disrupted by serial mergers, but her job might seem like a very good job taken abstractly without consideration to the firm, coworkers, and bosses.

Working for a bad boss and low pay with a bunch of back-stabbers would be the worst. So, job quality is a deep matrix, where bosses, firms, coworkers and even the work itself come into play as well as pay. Still though to have life outside of work with a roof over your head and decent food to eat then there is nothing that beats good pay. Reply Friday, February 24, 2017 at 06:53 AM Peter K. said in reply to RC AKA Darryl, Ron... "I was a lucky dog right down to the end."

From your online personality, you seem to me to be smart, wise and a hard worker. Employers would be lucky to have you. So it wasn't all luck.

These conservative, corporate workaholics work very hard and see no luck in their success. Or if they do see luck it's with the philosophy, better me than some other poor sucker. Dog eat dog. But I'm not telling you anything you don't already know.
Reply Friday, February 24, 2017 at 09:22 AM RC AKA Darryl, Ron said in reply to Peter K.... Yep, but I was never smart or wise enough to get that yes man thing down pat. I was lucky that was not my undoing. Where the wisdom paid off was getting into a line of work that was critical to financial objectives and that required more cross discipline expertise than was readily found in one person (particularly one younger person), in effect to be indispensable. But I'm not telling you anything you don't already know.

I was also lucky to have worked in environments where my coworkers were decent people rather than backstabbers with just two exceptions, one guy at F&M Band for three months in 1978 and one guy at the VA state Department of Computer Services (forerunner to Virginia Information Technologies Agency) for four years, the latter counter-intuitively a period in which my bosses were better than usual. My last boss, the easiest going that I ever had despite being a Northrop Grumman hire rather than legacy state, retired just a few weeks before I was laid off.

A lot can go wrong in life that can be life altering or career altering. Just getting home alive from Viet Nam was a good break even though my first wife left me two weeks later. One must both live and stay out of jail to have any chance at all and some of that is always luck for most young men sewing their wild oats. Reply Friday, February 24, 2017 at 09:48 AM RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron... F&M BANK - Band was just wishful thinking. Reply Friday, February 24, 2017 at 09:50 AM cm said in reply to Peter K.... The luck part was to obtain a position where his merits translated to good pay and good working conditions. Without luck, no amount of preparation will amount to much.

A lot of meritorious people have to take positions below their intellectual potential or below what their college/academic degree suggests - less they would get if they were more "lucky".

Conversely, a lot of people get into positions either above their level of preparation, or where somebody else would have been a better fit. But once the position is taken we won't know.
Reply Saturday, February 25, 2017 at 12:09 AM ken melvin said in reply to RC AKA Darryl, Ron... No fan of Gates, but the taxing of labor to support capitalism was always a scam. Yes, tax robots, tax the means of production, tax profits, ... Reply Friday, February 24, 2017 at 07:04 AM RC AKA Darryl, Ron said in reply to ken melvin... The first US income tax was temporary to pay for the Civil War. The permanent income tax started in 1913 was implemented to replace Federal government tax income from tariffs that were lost due to the free trade movement. Capital gains tax rates have always been too low. Reply Friday, February 24, 2017 at 07:12 AM Peter K. said in reply to RC AKA Darryl, Ron... What I've found confusing is how sometime a tax on corporate taxes is referred to as an income tax. Reply Friday, February 24, 2017 at 09:24 AM pgl said in reply to Peter K.... "a tax on corporate taxes".

No such thing. It is a tax in corporate profits. Profits are a form of income. Reply Friday, February 24, 2017 at 09:37 AM Peter K. said in reply to pgl... "Profits are a form of income."

Income for a legal identity, the corporation, not for a person.

Do you think corporations should be given legal personhood? Reply Friday, February 24, 2017 at 09:48 AM pgl said in reply to Peter K.... No. But the shareholders of a corporation are people. And the current tax code already gives them way too many deferral benefits. End those benefits and we would not need this corporate profits tax. Every progressive knows this. Well everyone but you. Reply Friday, February 24, 2017 at 09:52 AM Peter K. said in reply to pgl... " Every progressive knows this. Well everyone but you."

Shove it up your a$$.

"They say don't feed trolls so I guess I shouldn't feed you and your constant need for attention." Reply Friday, February 24, 2017 at 10:06 AM Peter K. said in reply to pgl... "No. But the shareholders of a corporation are people. "

No kidding, but we were talking about a corporate tax being called an income tax. We weren't talking about a shareholder tax you dumbass.

The corporation makes the profits, not the shareholders.

Shareholder's "income" - they work so hard for it! - is taxed by the capital gains tax. Reply Friday, February 24, 2017 at 10:09 AM

[Feb 26, 2017] Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at

Feb 26, 2017 | economistsview.typepad.com
JF -> pgl... February 24, 2017 at 11:45 AM , 2017 at 11:45 AM
Yes, profits are a form of income, but at that point they indirectly touch wealth accumulation and sharing, and before that they fuel wages for managers of capital and have historically been a measure that influence the price of stock, an indirect touch on wealth accumulation. We know what has happened to basic wages/salaries, no reason to expect they would get to share in the gains of further tax cuts, so let us face it, as you note, huge drops in the tax rate on profits will directly benefit wealth and high income people (though not because they would have earned it other than by lobbying).

So ok, harmonize rates with OECD, but offset revenue losses on the personal income tax side so at least some of the upward redistribution is in that proscribed tax base (which does not tax wealth, per the Pollack decision of the Court).

Know you know this, hope other readers get this too.

RC AKA Darryl, Ron -> pgl... , February 24, 2017 at 10:00 AM
In 1913 the personal exemption was $3K for singles and $4K for married couples and the tax rate was just 1% for the first $20K of income. The highest bracket was $500K with a 7% income tax rate. We started off on the correct foot anyway.

https://www.irs.gov/uac/soi-tax-stats-historical-table-23

DrDick -> RC AKA Darryl, Ron... , February 24, 2017 at 11:47 AM
Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

https://en.wikipedia.org/wiki/Revenue_Act_of_1913

RC AKA Darryl, Ron -> DrDick... , February 24, 2017 at 12:34 PM
True. "We started off on the correct foot" was in no way meant to imply that we were on our feet at all today. Back then what you and I make today in relative terms would have put us in the 1% tax bracket and people making $20 million or more today would have been taxed in the top bracket which was taxed at a rate seven times higher than ours.

[Feb 26, 2017] Reply

Feb 26, 2017 | onclick="TPConnect.blogside.reply('6a00d83451b33869e201b7c8d9beab970b'); return false;" href="javascript:void 0">
Friday, February 24, 2017 at 11:34 AM cm said in reply to Peter K.... If profits are not income then somebody should explain to me why all of business, finance, analysts, and almost all of institutional and private society are obsessed, sometimes to a pathological degree, with increasing them.
Reply Saturday, February 25, 2017 at 12:19 AM

[Feb 26, 2017] The Revenge Of Comet Pizza Zero Hedge

Feb 26, 2017 | www.zerohedge.com

Remember that one? It was about as weird as it gets. A meme generated out of the voluminous hacked John Podesta emails that some conspiracy connoisseurs cooked up into a tale of satanic child abuse revolving around a certain chi-chi Washington DC pizza joint. I never signed on with the story, but it was an interesting indication of how far the boundaries of mass psychology could be pushed in the mind wars of politics.

Sex, of course, is fraught. Sex and the feelings it conjures beat a path straight to the limbic system where the most primitive thoughts become the father of the most primitive deeds. In our American world, this realm of thought and deed has turned into a political football with the Left and the Right scrimmaging ferociously for field position - while the real political agenda of everything important other than sex lies outside the stadium.

The Comet Pizza story was understandably upsetting to Democrats who didn't like being painted as child molesters. Unfortunately for them, it coincided with the bust of one Anthony Weiner - and his infamous laptop - disgraced former "sexting" congressman, husband of Hillary's top aide and BFF, Huma Abedin. The laptop allegedly contained a lot of child porn.

That garbage barge of sexual allegation and innuendo couldn't have helped the Hillary campaign, along with all the Clinton Foundation stuff, in the march to electoral loserdom. I suspect the chthonic darkness of it all generated the "Russia-did-it" hysteria that cluttered up the news-cloud during the first month of Trumptopia. The collective superego of America is reeling with shame and rage.

On the Right side of the spectrum stood the curious figure of Milo Yiannopoulos, the self-styled "Dangerous Faggot," who has made a sensational career lately as an ideological provocateur, especially on the campus scene where he got so into the indignant faces of the Maoist snowflakes with his special brand of boundary-pushing that they resorted to disrupting his events, dis-inviting him at the last moment, or finally rioting, as in the case at UC Berkeley a few weeks ago.

Milo's battles on campus were particularly ripe because his opponents on the far Left were themselves so adamant about their own brand of boundary-pushing along the frontier of the LGBTQ agenda. The last couple of years, you would've thought that half the student population fell into one of those "non-binary" sex categories, and it became the most urgent mission of the Left to secure bathroom rights and enforce new personal pronouns of address for the sexually ambiguous.

But then Milo made a tactical error. Despite all the mutual boundary-pushing on each side, he pushed a boundary too far and entered the final dark circle of taboo: child molesting. That was the point were the closet Puritan hysterics went in for the kill. This is what he said on a Web talk radio show:

What normally happens in schools, very often, is you have an older woman with a younger boy, and the boy is the predator in that situation. The boy is like, let's see if I can fuck the gym teacher, or let's see if I can fuck the hot math teacher, and he does. The women fall in love with these nubile young boys, these athletic young boys in their prime. We get hung up on the child abuse stuff to the point where we're heavily policing consenting adults, grad students and their professors, this arbitrary and oppressive idea of consent, which totally destroys the understanding many of us have about the complexities, subtleties, and complicated nature of many relationships. In the homosexual world particularly, some of the relationships between younger boys and older men, the sort of coming-of-age relationships in which these older men help those young boys discover who they are, and give them security and provide them with love . [Milo is shouted down by his podcast hosts]

So that was the final straw. Milo got bounced by his platform, Breitbart News , and went through the now-routine, mandatory, abject ceremonial of the televised apology required by over-stepping celebrities - though he claimed, with some justification I think, that his remarks were misconstrued. Anyway, I'm sure he'll rebound on his own signature website platform and he'll be back in action before long.

His remarks about the "coming-of-age" phase of life prompted me to wonder about the boundary-pushers on the Left, on the college campuses in particular, who are encouraging young people to go through drastic sex-change surgeries, at an age before the development of that portion of their frontal lobes controlling judgment is complete. Who are these diversity deans and LGBTQ counselors who lead confused adolescents to self-mutilation in search of some hypothesized "identity?" Whoever they are, this dynamic seems pretty reckless and probably tragic to me. There ought to be reasonable doubt that an irreversible "sexual reassignment" surgery may not lead to personal happiness some years down the line - when, for instance, that person's frontal lobes have developed, and they begin to experience profound and complicated emotions such as remorse.

Our sexual hysteria has many more curious angles to it. We live in a culture where pornography, up to the last limits of freakishness and depravity, is available to young unformed personalities at a click. We stopped protecting adolescents against this years ago, so why should we be surprised when they venture into ever-darker frontiers of sexuality? It was the Left that sought to abolish boundaries in sex and many other areas of American life. And yet they still affect to be shocked by someone like Milo.

I maintain that there is a dynamic relationship between our inability to act on the truly pressing issues of the day - energy, economy, and geo-politics - and our neurotic preoccupation with sexual identity. The epic amount of collective psychic energy being diverted from what's important into sexual fantasy, titillation, confusion, and litigation leaves us pathetically unprepared to face the much more serious crisis of civilization gathering before us.

*

Postscript : This item from The Stanford [University] Daily newspaper puts a nice gloss on the stupefying idiocy in the campus sex-and-identity debate. Single-occupancy Restrooms Convert to All-gender Facilities : "Single-occupancy restrooms on campus will soon all be converted to gender-neutral facilities due to new California legislature and ongoing administrative efforts. The Diversity and Access Office (D&A Office) has been spearheading the campaign to convert all single-occupancy restrooms ."

Here's what I don't get: if a single-occupancy restroom is going to be used by one person at a time, what need is there to officially designate the sex of any person using it? And why are officials at an elite university wasting their time on this?

  1. routersurfer February 24, 2017 at 9:44 am # I agree totally this perverted national pastime of pin the genitalia on the mass of confused youth is a waste of time and energy. Anyone who reaches for the scalpel and plastic surgery before 25 has not been served well by the so called adults in their lives. Nature makes mistakes. Look at the Royals of Europe. But wait until the body is formed before the Medical Industrial Complex steps in. Now back to real problems. I heard on Bloomberg radio The Fed may offer 50 and 100 year T notes. Can someone explain how that fits into our system of accounting scams??

[Feb 26, 2017] Militarists from Obama administration essentially continued Bush II policies and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating conversion of passenger cards to hybrids (and electrical for short commutes)

Feb 26, 2017 | economistsview.typepad.com
im1dc : Reply Saturday, February 25, 2017 at 10:08 AM

, February 25, 2017 at 10:08 AM
Update US Crude Oil production, market, and exports

http://maritime-executive.com/article/us-oil-exports-hit-record-levels

"U.S. Oil Exports Hit Record Levels"

By MarEx 2017-02-24

"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2 million barrels of crude per day, roughly double the levels seen at the end of last year.

Analysts told Bloomberg that the rising American exports are driven in large part by falling domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below the international Brent standard by $2 per barrel or more, and are now cheaper than some Middle Eastern grades of lesser quality. This makes American crude more attractive to Asian buyers.

There is also an incentive for traders to sell their oil abroad: U.S. storage is costly. If the price of crude is not expected to rise, brokers have no incentive to hang on to their supply and pay rent on a tank to put it in."...

ilsm -> im1dc... , February 25, 2017 at 01:16 PM
From the report:

The greens might not be happy US is polluting to ship gasoline and distillates out!

ilsm -> ilsm... , February 25, 2017 at 01:19 PM
See: http://www.eia.gov/petroleum/supply/weekly/

Table 1, open the .xls see data 2 for Feb 17 2017 at the bottom.

im1dc -> ilsm... , February 25, 2017 at 02:00 PM
ilsm, that is the previous week I believe.
libezkova -> ilsm... , February 25, 2017 at 04:33 PM
You are just regular incompetent chichenhawk. And it shows. Try to read something about US oil industry before positing. It is actually a very fascinating topic. That's where the battle for survival of neoliberalism in the USA (with its rampant militarism and impoverishment of lower 50% of population) is now fought.

If you list also domestic consumption, you will understand that you are completely misunderstanding and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl; see ilsm post), not an exporter. You can consider it to be exported only after drinking something really strong.

It refines and re-export refined products and also export condensate and shale light oil that is used for dilution of heavy oils in Canada and Latin America. That's it.

US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for well started in 2009-2016), and if interest on already existing loans (all shale industry is deeply in debt; ) and minimum profitability (2.5%) is factored in, probably $77.

That's why production is declining and will decline further is prices stay low because there is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In 2017 they are mostly gone, so what's left is not so attractive at the current prices. And this is an understatement.

The same is true to Canadian sands. Plans for expansion are now revised down and investments postponed.

So in order to sustain the US shale industry prices need to grow at least over $65 this year

And those war-crazy militarists from Obama administration essentially continued Bush II policies and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating conversion of passenger cards to hybrids (and electrical for short commutes).

The US as a country waisted its time and now is completely unprepared for down of oil age.

The net result of Obama policies is that SUVs became that most popular type of passenger cars in the USA. That can be called Iran revenge on the USA.

The conflict between Donald Trump and the US Deep State can be explained that deep state can't allow Trump détente with Russia and stopping wars on neoliberal expansion at Middle East. That's why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show him who is the boss and warn "You can be fired".

Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that might cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism as social system) can well go off the cliff when cheap oil is gone.

The only question is when it happens and estimates vary from 10 to 50 years.

So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years (1917-1991) by only something like 15 years.

[Feb 26, 2017] They have no idea how crooked you need to be to fund a party operation

Feb 26, 2017 | economistsview.typepad.com
jonny bakho -> Peter K.... , February 25, 2017 at 10:26 AM
The DNC head is the chief fundraiser for the party.
DNC raises and distributes money
The DNC needs to be able to collect money from donors across the spectrum
DNC does not control policy or issues.

Sanders supporters who think this is about policy never bothered to learn about how the party they tried to take over works.

pgl -> jonny bakho... , February 25, 2017 at 12:11 PM
"DNC does not control policy or issues. Sanders supporters who think this is about policy never bothered to learn about how the party they tried to take over works."

But who controls the money controls a lot more. We are on the 2nd round and it will be close. I'm for Ellison for reasons Max Sawicky's excellent new blog articulated. If Perez pulls this off - he has a lot of fence mending to do.

jonny bakho -> pgl... , February 25, 2017 at 12:19 PM
Oh Please.
The Local Sanders supporters are already engaged locally.
The whiners will complain about Ellison if he should win
The first time Ellison takes money from big donors they will disown him.
They have no idea what it takes to fund a party operation.
Breitbart and the GOP are cheering the whiners on
pgl -> jonny bakho... , February 25, 2017 at 12:29 PM
Perez won and then asked for Ellison to be his vice chairman. For now - it is all hugs and kisses in Atlanta. Let's see how long this lasts.
ilsm -> jonny bakho... , February 25, 2017 at 12:51 PM
They have no idea how crooked you need to be to fund a party operation
jonny bakho -> pgl... , February 25, 2017 at 01:08 PM
The policy debates are won at groups that will form the ultimate coalition for candidate support. Say your interest is public schools. The group supporting your local school is horrified that vouchers are taking away the money. The group builds support for the anti voucher position. A union group wants more job training opportunities. An energy group wants solar metering. These groups have their own agenda separate from the DNC and RNC and they bring together groups of like minded individuals who socialize in addition to their advocacy. When the election comes, they are positioned to work for candidates that agree with their position. The candidate can get some of them to volunteer for the campaign, but their is a need for voter lists, support for registration, etc.

The issue for Sanders supporters is they rallied around a messianic leader without much local group persistence. If those supporters want to help in the next election, the would be advised to build advocacy support within their social groups.

pgl -> pgl... , February 25, 2017 at 12:30 PM
The update and analysis from Max is already up:

http://thepopulist.buzz/2017/02/25/dnc-vote-establishment-1-progressives-0/

jonny bakho -> pgl... , February 25, 2017 at 12:41 PM
Max is not correct
In my phone banking last election, the most numerous complaint I received was:
"Everything is going to the black and the gays".
The Catholics and Christian Right voted for antiabortion SCOTUS justices
Our state, IN is trying to make it impossible for minors to get abortions and doing their best to create conditions for a black market
The people we need to persuade don't care about the DNC
For the most part, local activists don't care either as long as whoever wins will successfully raise a lot of money and provide the training and tools we need
pgl -> jonny bakho... , February 25, 2017 at 01:13 PM
You articulate your case indeed. And your list for the policy agenda is well noted. I would love to see you and Max Sawicky engage in a debate of these things. Like you - he is never shy of stating his views.

In the olden says, his blog Max Speaks You Listen was often cited by many left of center economists. He had to go silent as he worked within the government but now he is free of that restriction. I don't always agree with him but I do admire his style.

[Feb 26, 2017] No, Robots Aren't Killing the American Dream, it's neoliberal economics which are killing it

Feb 26, 2017 | economistsview.typepad.com
Peter K. : February 25, 2017 at 07:50 AM , 2017 at 07:50 AM
https://www.nytimes.com/2017/02/20/opinion/no-robots-arent-killing-the-american-dream.html

No, Robots Aren't Killing the American Dream
By THE EDITORIAL BOARD

FEB. 20, 2017

Defenders of globalization are on solid ground when they criticize President Trump's threats of punitive tariffs and border walls. The economy can't flourish without trade and immigrants.

But many of those defenders have their own dubious explanation for the economic disruption that helped to fuel the rise of Mr. Trump.

At a recent global forum in Dubai, Christine Lagarde, head of the International Monetary Fund, said some of the economic pain ascribed to globalization was instead due to the rise of robots taking jobs. In his farewell address in January, President Barack Obama warned that "the next wave of economic dislocations won't come from overseas. It will come from the relentless pace of automation that makes a lot of good middle-class jobs obsolete."

Blaming robots, though, while not as dangerous as protectionism and xenophobia, is also a distraction from real problems and real solutions.

The rise of modern robots is the latest chapter in a centuries-old story of technology replacing people. Automation is the hero of the story in good times and the villain in bad. Since today's middle class is in the midst of a prolonged period of wage stagnation, it is especially vulnerable to blame-the-robot rhetoric.

And yet, the data indicate that today's fear of robots is outpacing the actual advance of robots. If automation were rapidly accelerating, labor productivity and capital investment would also be surging as fewer workers and more technology did the work. But labor productivity and capital investment have actually decelerated in the 2000s.

While breakthroughs could come at any time, the problem with automation isn't robots; it's politicians, who have failed for decades to support policies that let workers share the wealth from technology-led growth.

The response in previous eras was quite different.

When automation on the farm resulted in the mass migration of Americans from rural to urban areas in the early decades of the 20th century, agricultural states led the way in instituting universal public high school education to prepare for the future. At the dawn of the modern technological age at the end of World War II, the G.I. Bill turned a generation of veterans into college graduates.

When productivity led to vast profits in America's auto industry, unions ensured that pay rose accordingly.

Corporate efforts to keep profits high by keeping pay low were countered by a robust federal minimum wage and time-and-a-half for overtime.

Fair taxation of corporations and the wealthy ensured the public a fair share of profits from companies enriched by government investments in science and technology.

Productivity and pay rose in tandem for decades after World War II, until labor and wage protections began to be eroded. Public education has been given short shrift, unions have been weakened, tax overhauls have benefited the rich and basic labor standards have not been updated.

As a result, gains from improving technology have been concentrated at the top, damaging the middle class, while politicians blame immigrants and robots for the misery that is due to their own failures. Eroded policies need to be revived, and new ones enacted.

A curb on stock buybacks would help to ensure that executives could not enrich themselves as wages lagged.

Tax reform that increases revenue from corporations and the wealthy could help pay for retraining and education to protect and prepare the work force for foreseeable technological advancements.

Legislation to foster child care, elder care and fair scheduling would help employees keep up with changes in the economy, rather than losing ground.

Economic history shows that automation not only substitutes for human labor, it complements it. The disappearance of some jobs and industries gives rise to others. Nontechnology industries, from restaurants to personal fitness, benefit from the consumer demand that results from rising incomes in a growing economy. But only robust public policy can ensure that the benefits of growth are broadly shared.

If reforms are not enacted - as is likely with President Trump and congressional Republicans in charge - Americans should blame policy makers, not robots.

jonny bakho -> Peter K.... , February 25, 2017 at 10:42 AM
Robots may not be killing jobs but they drastically alter the types and location of jobs that are created. High pay unskilled jobs are always the first to be eliminated by technology. Low skill high pay jobs are rare and heading to extinction. Low skill low pay jobs are the norm. It sucks to lose a low skill job with high pay but anyone who expected that to continue while continually voting against unions was foolish and a victim of their own poor planning, failure to acquire skills and failure to support unions. It is in their self interest to support safety net proposal that do provide good pay for quality service. The enemy is not trade. The enemy is failure to invest in the future.

"Many working- and middle-class Americans believe that free-trade agreements are why their incomes have stagnated over the past two decades. So Trump intends to provide them with "protection" by putting protectionists in charge.
But Trump and his triumvirate have misdiagnosed the problem. While globalization is an important factor in the hollowing out of the middle class, so, too, is automation

Trump and his team are missing a simple point: twenty-first-century globalization is knowledge-led, not trade-led. Radically reduced communication costs have enabled US firms to move production to lower-wage countries. Meanwhile, to keep their production processes synced, firms have also offshored much of their technical, marketing, and managerial knowhow. This "knowledge offshoring" is what has really changed the game for American workers.

The information revolution changed the world in ways that tariffs cannot reverse. With US workers already competing against robots at home, and against low-wage workers abroad, disrupting imports will just create more jobs for robots.
Trump should be protecting individual workers, not individual jobs. The processes of twenty-first-century globalization are too sudden, unpredictable, and uncontrollable to rely on static measures like tariffs. Instead, the US needs to restore its social contract so that its workers have a fair shot at sharing in the gains generated by global openness and automation. Globalization and technological innovation are not painless processes, so there will always be a need for retraining initiatives, lifelong education, mobility and income-support programs, and regional transfers.

By pursuing such policies, the Trump administration would stand a much better chance of making America "great again" for the working and middle classes. Globalization has always created more opportunities for the most competitive workers, and more insecurity for others. This is why a strong social contract was established during the post-war period of liberalization in the West. In the 1960s and 1970s institutions such as unions expanded, and governments made new commitments to affordable education, social security, and progressive taxation. These all helped members of the middle class seize new opportunities as they emerged.
Over the last two decades, this situation has changed dramatically: globalization has continued, but the social contract has been torn up. Trump's top priority should be to stitch it back together; but his trade advisers do not understand this."

https://www.project-syndicate.org/commentary/trump-trade-policy-tariffs-by-richard-baldwin-2017-02

Peter K. : , February 25, 2017 at 07:52 AM
http://econospeak.blogspot.com/2017/02/the-cutz-putz-bezzle-graphed-by-fred.html

FRIDAY, FEBRUARY 24, 2017

The "Cutz & Putz" Bezzle, Graphed by FRED

anne at Economist's View has retrieved a FRED graph that perfectly illustrates the divergence, since the mid-1990s of net worth from GDP:

[graph]

The empty spaces between the red line and the blue line that open up after around 1995 is what John Kenneth Galbraith called "the bezzle" -- summarized by John Kay as "that increment to wealth that occurs during the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it."

In Chapter of The Great Crash, 1929, Galbraith wrote:

"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country's business and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks."

In the present case, the bezzle has resulted from an economic policy two step: tax cuts and Greenspan puts: cuts and puts.

[graph]

Peter K. -> Peter K.... , February 25, 2017 at 07:52 AM
Well done.
anne -> Peter K.... , February 25, 2017 at 08:12 AM
https://fred.stlouisfed.org/graph/?g=cOU6

January 15, 2017

Gross Domestic Product and Net Worth for Households & Nonprofit Organizations, 1952-2016

(Indexed to 1952)


https://fred.stlouisfed.org/graph/?g=cPq1

January 15, 2017

Gross Domestic Product and Net Worth for Households & Nonprofit Organizations, 1992-2016

(Indexed to 1992)

Peter K. : , February 25, 2017 at 07:56 AM
http://www.alternet.org/story/148501/why_germany_has_it_so_good_--_and_why_america_is_going_down_the_drain

Why Germany Has It So Good -- and Why America Is Going Down the Drain

Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. Why the US pales in comparison.

By Terrence McNally / AlterNet October 13, 2010

ECONOMY
Why Germany Has It So Good -- and Why America Is Going Down the Drain
Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. Why the US pales in comparison.
By Terrence McNally / AlterNet October 13, 2010
1.4K31
Print
207 COMMENTS
While the bad news of the Euro crisis makes headlines in the US, we hear next to nothing about a quiet revolution in Europe. The European Union, 27 member nations with a half billion people, has become the largest, wealthiest trading bloc in the world, producing nearly a third of the world's economy -- nearly as large as the US and China combined. Europe has more Fortune 500 companies than either the US, China or Japan.

European nations spend far less than the United States for universal healthcare rated by the World Health Organization as the best in the world, even as U.S. health care is ranked 37th. Europe leads in confronting global climate change with renewable energy technologies, creating hundreds of thousands of new jobs in the process. Europe is twice as energy efficient as the US and their ecological "footprint" (the amount of the earth's capacity that a population consumes) is about half that of the United States for the same standard of living.

Unemployment in the US is widespread and becoming chronic, but when Americans have jobs, we work much longer hours than our peers in Europe. Before the recession, Americans were working 1,804 hours per year versus 1,436 hours for Germans -- the equivalent of nine extra 40-hour weeks per year.

In his new book, Were You Born on the Wrong Continent?, Thomas Geoghegan makes a strong case that European social democracies -- particularly Germany -- have some lessons and models that might make life a lot more livable. Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. But you've heard the arguments for years about how those wussy Europeans can't compete in a global economy. You've heard that so many times, you might believe it. But like so many things, the media repeats endlessly, it's just not true.

According to Geoghegan, "Since 2003, it's not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors -- China foremost among them -- Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They're beating us with one hand tied behind their back."

Thomas Geoghegan, a graduate of Harvard and Harvard Law School, is a labor lawyer with Despres, Schwartz and Geoghegan in Chicago. He has been a staff writer and contributing writer to The New Republic, and his work has appeared in many other journals. Geoghagen ran unsuccessfully in the Democratic Congressional primary to succeed Rahm Emanuel, and is the author of six books including Whose Side Are You on, The Secret Lives of Citizens, and, most recently,Were You Born on the Wrong Continent?

...

ilsm -> Peter K.... , February 25, 2017 at 12:55 PM
While the US spends half the war money in the world over a quarter the economic activity...... it fall further behind the EU which at a third the economic activity spends a fifth the worlds warring. Or 4% of GDP in the war trough versus 1.2%.

There is correlation with decline.

[Feb 26, 2017] The EPA that neoliberals want to destory was created by Nixon, more or less our last New Deal consensus President. The point of the EPA was to force industry to price in environmental externalities

Feb 26, 2017 | www.nakedcapitalism.com
jsn , February 24, 2017 at 12:04 pm

The EPA was created by Nixon, more or less our last New Deal consensus President. The point of the EPA was to force industry to price in environmental externalities which in the high price/high inflation vision of the New Deal would have created new jobs and real wealth while fostering investment in real innovation. The Reagan Revolution started by taking the ideological mush of Carter Administration proto-NeoLiberal thinking about anti-trust, monetarism and wage push inflation and applied Thatchers full bore "there is no such thing as society" NeoLiberalism. This new ideology justified gutting organized Labor, enforcing anti-trust FOR "efficiency" rather than AGAINST monopolistic, power concentrating, job eliminating industry consolidation and rationalized choking any growth in wages, labor power, as inflationary.

Once these policies were in place, the Government that implemented them went on a crusade against itself, the "big government" necessary to repair the damage it had itself just done: wages decoupled from productivity, consumer debt began its inexorable climb, government was branded "the problem, not the solution" and the Treasury inventory held at the Fed, necessary to underwrite the outstanding stock of the worlds dollar denominated, privately held (non USG) wealth, was re-branded, falsely, as a "burdensome debt on future generations". To that point, the Institutionalists and residual Functional Finance people responsible for fiscal and monetary policy clearly understood this "debt" was the necessary liability side to the assets held in dollar instruments outside the Federal Government (which continues to be the case: to reduce the Federal "debt" is to reduce the outstanding holdings of dollar wealth: every liability has its matching asset somewhere and to be rid of one is to be rid of the other).

The transfer of power from Labor to Corporations was a very apparent reality in industrialized areas, but an invisible shift outside the lives of the newly precariat industrial workers (I remember being mystified and frightened when laid off auto workers, some living in their cars, showed up in Austin in the mid 70s looking for work). Newly stagnant wages were blamed on "regulations" to convince the half of the population that lived outside the urban economies where the benefits of New Deal high cost, high inflation fiscal and monetary policy delivered the bulk of its benefits, that the new costs created by fiscal and monetary austerity were in fact caused by the EPA and work safety rules. In the new ideology of low costs and low inflation, incentives reversed and investment to to clean manufacturing was presented as a cost that industry couldn't afford that in fact caused industry to fire workers or reduce wages to pay for.

The low cost, low inflation rationale makes intuitive sense to conservative rural populations and was easily internalized by worker/producers who were now told to think of themselves as "consumers": for a consumer low cost low inflation is good, for a worker/producer, high wages and costs were good. High prices and high wages with moderately high inflation were a mechanism whereby growth was used to encourage investment in the public interest: environmental and safety regulations. Investments in these areas created new, better and safer processes and under the old anti-trust regime ensured productivity gains were shared with labor through the wage competition of full employment.

It's a long, complicated mess, but its an integrated problem. Real wealth, health, education and a clean environment are in the most important ways synonyms. They need to be pursued together and thought of holistically. Universal education; universal healthcare; universal, free, continuing education; a life sustaining environment are all real wealth and should never be confused with money or costs.

Dead Dog , February 24, 2017 at 3:06 pm

Good post, Sport. It's a mess that doesn't seem like it will fixed

There is no way US residents should put up with this shit.

I'd be movin if I could

jsn , February 24, 2017 at 4:20 pm

Where to? The environment is global, you can run but you can't hide.

I'll stay here and duke it out, if could just get a clear swing at something that would make a difference!

[Feb 26, 2017] The essence of deep state meme is that color revolution ( nicknamed purple revolution ) is launched against Trump by a coalition of Democratic Party operatives, a faction of

Feb 26, 2017 | economistsview.typepad.com
ilsm -> Peter K.... February 25, 2017 at 01:52 PM
Progressive dems would not have moles in the deep state!
im1dc -> ilsm... , February 25, 2017 at 02:10 PM
Give up the "deep state" meme, total nonsense.
libezkova -> im1dc... , February 25, 2017 at 04:43 PM
So you are denying that "color revolution" methods are now used against Trump administration.

Nice.

Compare with

http://beforeitsnews.com/politics/2017/01/trump-vs-cia-djt-forced-to-finish-the-fight-started-by-jfk-2876647.html

im1dc -> libezkova... , February 25, 2017 at 04:56 PM
This is what I posted and meant:

"Give up the "deep state" meme, total nonsense."

libezkova -> im1dc... , February 25, 2017 at 06:26 PM
The essence of "deep state" meme is that "color revolution" ( nicknamed "purple revolution") is launched against Trump by a coalition of Democratic Party operatives, a faction of Wall Street (Globalist Billionaires), a faction of MIC, and powerful factions of three letter agencies (and first of all CIA).

It's no coincidence that JFK wished he could splinter the CIA 'Into A Thousand Pieces And Scatter It Into The Winds'. And paid the ultimate price for this wish. The CIA coup like JFS assassination that involves removal of Trump from power is what the "deep state meme" currently implies.

http://themillenniumreport.com/2017/02/may-day-may-day-may-day/

== quote ==

The Deep State Conducts a Purple Revolution Against the Trump Administration

State of the Nation

There is now a full-scale clandestine revolutionary war being waged against the Trump Administration. The C.I.A. usually attempts a soft coup first at the direction of its masters in Deep State. When that's not successful in effectuating a regime change, they know the territory has been sufficiently softened up for the hot phase of the revolution.

In these United States of America, that revolution is known as the ongoing but rapidly intensifying Purple Revolution. This seditious revolution began the very day that President Trump won the election on November 8, 2016, if not before.

KEY POINTS:

• Deep State will not permit President Trump to govern as POTUS.

• Deep State uses the C.I.A. and the Mainstream Media (MSM) to run interference at every turn against the Trump Administration

• Deep State will continue to prosecute the revolution until Trump is removed from power

• Deep State will eventually attempt to oust the entire Trump Administration

These preceding bullet points constitute the current NWO globalist agenda being implemented throughout the USA in direct opposition to the Trump Administration. In other words, when Assistant to the President and White House Chief Strategist Steve Bannon said that the Mainstream Media (MSM) had morphed into the opposition party, he was speaking literally.

"Steve Bannon: 'I Could Care Less' About Repairing Relationship with 'Opposition Party' Media" - BREITBART

A Counter Declaration of War on the Mainstream Media

There you have it (see preceding link), the whole world is now witnessing an all-out war between the MSM and a sitting POTUS. This unparalleled conflict is not only being fought between the Mainstream Media and the Trump Administration, it's occurring throughout the entire body politic of the USA and beyond.

The U.S. citizenry saw as never before the complete lack of integrity exhibited by the MSM during the entire 2016 election cycle. Candidate Trump exposed the lying media and avalanche of fake news with his every news conference and campaign stop. In so doing, the whole world is now aware that the MSM can never - EVER - be trusted again.

Because the MSM is the primary mouthpiece of Deep State, a highly consequential decision was made by its concealed leadership to remove Trump from power with great haste and recklessness lest their Global Control Matrix experience an unprecedented collapse. Deep State knows full well that it's now in its death throes. And that such grave existential threats must be faced before its entire superstructure (and infrastructure) falls into it own footprint.

This 21st century "War of the Titans" has gotten so hot, in fact, that there is now no turning back for either side. IT WILL BE A FIGHT TO THE DEATH.

Because the Mainstream Media has been outed like never, the most likely outcome is that it will simply be shut down. The public domain is now replete with hard evidence proving treason and sedition perpetrated over many decades by the MSM. Once the American people have reviewed the relevant proof of high treason and crimes against humanity, it will only be a matter of MSM industrywide criminal prosecution.

Bear in mind that Deep State cannot function to any reasonable degree without total ownership and efficient functioning of the media. The C.I.A., as well as the other 16 US intelligence agencies, all require the media cover staunchly provided by the MSM. So does the Military-Industrial Complex, as does the much larger Government-Corporate Complex. Therefore, when the MSM finally crashes and burns, so will all of the other major entities which comprise the Deep State.

"MAY DAY! MAY DAY! MAY DAY!"

With this critical understanding it ought to be quite obvious that the next 120 days are pivotal for Deep State. Every single day that the Trump Administration is able to consolidate and increase its power, Deep State loses its influence throughout the US government and the world-at-large. Such a crucial attenuation of power will serve as the death knell of the Deep State within the American Republic.

Hence, there is now a great race against time for both sides of this epic war. The agents of Deep State clearly hope that a soft coup will be successful through a presidential impeachment or by other means. The C.I.A. recently executed such a strategy to 'peacefully' remove Dilma Rousseff, the 36th President of Brazil.

Make no mistake about it, if a soft coup is not successful, the agents of Deep State will commence the hot phase of their Purple Revolution. Everything points to a massive May Day stealth event. An unrivaled National Mall rally in D.C. attended by the many misguided groups which make up the Democratic Party is already in the works.

An enormous May Day protest could be used to manufacture a context in which a Maidan type event takes place (remember the violent uprising in Kiev, Ukraine). The Illuminati are notorious for using dates and numerology by which to stage their revolutions and civil wars over centuries (e.g. May Day parades and terror events). Just as the engineered uprising in Kiev was surreptitiously utilized to force Ukrainian President Viktor Yanukovych into exile, a similar trigger point could be fabricated by which the Bolshevik Left goes really crazy and tries to chase Trump from the White House.

[Feb 26, 2017] What she did with bathroom email server is worse then a crime. It is a blunder. Which disqualifies Hillary (and her close entourage) for any government position.

Feb 26, 2017 | economistsview.typepad.com
ilsm -> geoff ... February 25, 2017 at 01:00 PM , 2017 at 01:00 PM
Clinton should have been prosecuted.

The GOP need not worry as long as the news is Russia!

im1dc -> ilsm... , February 25, 2017 at 02:16 PM
"Clinton should have been prosecuted."

I repeat to you this umpteenth time 'no mens rea' = no prosecution.

ilsm -> im1dc... , February 25, 2017 at 05:12 PM
The conclusion from 'no mens rea' implies "simple negligence", simple negligence only applies to GS 3's. The managers and the experience are held to a higher standard.

If it was 'no mens rea' then she was neither qualified nor experienced, she is no accountable.

Which may be okay for crooks in the swamp needing drained.

libezkova -> ilsm... , February 25, 2017 at 06:13 PM
ilsm,

What she did with "bathroom email server" is worse then a crime. It is a blunder. Which disqualifies Hillary (and her close entourage) for any government position.

The level of incompetence and arrogance demonstrated is just astounding. Actually it is not astounding. It is incredible. I can't believe that a person with Yale law degree can be so hopelessly stupid and arrogant.

geoff -> ilsm... , February 25, 2017 at 02:16 PM

Clinton should have....not been the dem nominee. The Russia fixation is all yours.

[Feb 25, 2017] Most of the skill and experience has to be acquired on the job - into which graduates will not be hired

Feb 25, 2017 | economistsview.typepad.com
anne : February 25, 2017 at 05:23 AM

http://cepr.net/blogs/beat-the-press/if-inadequate-skills-is-preventing-people-from-being-hired-in-manufacturing-it-s-among-the-ceos

February 24, 2017

If "Inadequate Skills" Is Preventing People from Being Hired in Manufacturing, It's Among the CEOs

The Associated Press ran a story * that told readers:

"Factory jobs exist, CEOs tell Trump. Skills don't."

The piece presents complaints from a number of CEOs of manufacturing companies that they can't find the workers with the necessary skills. The piece does note the argument that the way to get more skilled workers is to offer higher pay, but then reports:

"some data supports the CEOs' concerns about the shortage of qualified applicants. Government figures show there are 324,000 open factory jobs nationwide - triple the number in 2009, during the depths of the recession."

The comparison to 2009 is not really indicative of anything, since this was a time when the economy was facing the worst downturn since the Great Depression and companies were rapidly shedding workers. A more serious comparison would be to 2007, before the recession. The job opening rate in manufacturing for the last three months has averaged 2.5 percent, roughly the same as in the first six months of 2007, which was still a period in which the sector was losing jobs.

According to the Bureau of Labor Statistics, average hourly earnings of production and non-supervisory workers in manufacturing has risen by 2.4 percent over the last year. This means that manufacturing firms are not acting in a way consistent with employers having trouble finding workers. This suggests that if there is a skills shortage it is among CEOs who don't understand that the price of an item in short supply, in this case qualified manufacturing workers, is supposed to increase.

* http://www.pbs.org/newshour/rundown/factory-jobs-exist-ceos-tell-trump-skills-dont/

Peter K. -> anne... , February 25, 2017 at 08:23 AM
See Tyler Cowen for the CEOs's sycophant.
mrrunangun said in reply to anne... , February 25, 2017 at 01:51 PM
Young people who have watched the stampede of manufacturing jobs out of the US may reasonably believe that they would be unwise to commit to developing any scarce skills currently needed in domestic manufacturing. Working in Illinois and Wisconsin, I know many skilled manufacturing technicians and engineers whose situations went from comfort to poverty in the space of a few years. Why would a young person today believe that manufacturing skills developed now will not be offshored the next time political winds shift? One of the reasons Trump got elected was by promising to protect the manufacturing jobs that are left, something that neither the Clintons, Bushes, nor Obama were willing to attempt.

I believe Trump is wrong to try to wreck NAFTA, but PNTR for China has been a disaster for the US working class. This was initiated by Clinton and neither Bush nor Obama did anything to mitigate its effect on working people in the Midwest.

cm -> mrrunangun... , February 25, 2017 at 03:57 PM
Even without that aspect, most of the "skill" and experience has to be acquired on the job - into which they will not be hired.

What most business managers are looking for is trained up people for whose training and hands-on skill somebody else has paid for. They don't want to be that "sucker" themselves.

I suspect it is not purely selfishness (though poaching has always existed), but this mindset has evolved in the past decades where business could draw on a large overhang of sufficiently-skilled labor at home and globally. It was possible to dial down training and still find enough qualified workers. This is one of those things where the downward path is easier than upward. In parallel corporate pensions and unions were eliminated or reduced, both things that promote worker retention; and corporate/public rhetoric shifted to make it clear that you will only have your job as long as you are useful to the company, and maintaining that is up to you. Well, that's a two-way street.

cm -> mrrunangun... , February 25, 2017 at 04:03 PM
One possible solution to the training problem has been practiced in Germany - the government passes out training quotas or subsidies to companies; it is basically "either you train them or you pay a no-training 'fee' and we train them for you". Most large companies have training programs, but they often exceed their demand for new workers (or they can find qualified workers or temps elsewhere), and not everybody will be hired after graduating. That part such programs cannot address.
anne -> cm... , February 25, 2017 at 04:14 PM
One possible solution to the training problem has been practiced in Germany - the government passes out training quotas or subsidies to companies; it is basically "either you train them or you pay a no-training 'fee' and we train them for you"....

[Feb 25, 2017] NAIRU: Dangerous Dogma at the Fed

Feb 25, 2017 | economistsview.typepad.com
RGC : , February 25, 2017 at 08:43 AM
Re: The NAIRU: a response to critics - mainly macro

[Simon is catching a lot of heat and is getting a little irritated.]
....................
The NAIRU: a response to critics

When I wrote my piece on NAIRU bashing, I mainly had in mind a few newspaper articles I had read which said we cannot reliably estimate it so why not junk the concept. What I had forgotten, however, is that for heterodox economists of a certain hue, the NAIRU is a trigger word, a bit like methodology is for mainstream economists. It conjures up lots of bad associations.

As a result, I got comments on my blog that were almost unbelievable. The most colourful was "NAIRU is the economic equivalent of "Muslim ban"". At least two wanted to hold me directly responsible for any unemployment at the NAIRU. For example: "So according to you a fraction of the workforce needs to be kept unemployed." Which is a bit like saying to doctors: "So according to you some people have to be allowed to die as a result of cancer."
...........
[PostKeynesians fire back]:
........
Simon Wren-Lewis, NAIRU And TINA

Last month, Matthew C Klein wrote an article for Financial Times' blog Alphaville arguing against the concept of NAIRU. Today, Simon Wren-Lewis published a reply to Klein on his blog defending NAIRU. SWL's argument is essentially that there is no alternative (TINA):

http://www.concertedaction.com/2017/02/17/simon-wren-lewis-nairu-and-tina/

RGC -> RGC... , February 25, 2017 at 08:54 AM
[By coincidence I posted this comment by Dean Baker yesterday]:


NAIRU: Dangerous Dogma at the Fed

BY DEAN BAKER

The Full Employment and Balanced Growth Act of 1978 established two goals to guide the
Federal Reserve's conduct of monetary policy: price stability and full employment, defined by
the Act as four percent unemployment. While the central bank has diligently pursued the first
goal, it has often given the second part of its mission short shrift. Indeed, past Fed policy
makers have publicly labeled four percent unemployment unobtainable for practical purposes.
..............
The experience of the last six years has unambiguously repudiated the NAIRU - at least insofar as an economic theory may ever be disproved with evidence.

Die-hard adherents simply proclaim the NAIRU a moving target that has shifted. But none of these advocates has explained convincingly why previous consensus estimates of the NAIRU went so far awry.

http://cepr.net/documents/publications/fmsno00.pdf

anne -> RGC... , February 25, 2017 at 08:57 AM
http://cepr.net/documents/publications/fmsno00.pdf

December, 2000

NAIRU: Dangerous Dogma at the Fed
By DEAN BAKER

The Full Employment and Balanced Growth Act of 1978 established two goals to guide the Federal Reserve's conduct of monetary policy: price stability and full employment, defined by the Act as four percent unemployment. While the central bank has diligently pursued the first goal, it has often given the second part of its mission short shrift. Indeed, past Fed policymakers have publicly labeled four percent unemployment unobtainable for practical purposes.

Instead of their statutory mandate, these central bankers sought guidance from the so-called non-accelerating inflation rate of unemployment, or NAIRU. Proponents of the NAIRU doctrine claim that some fixed level of unemployment exists that will yield a stable rate of inflation. If the actual unemployment rate surpasses this level, they say, the inflation rate will decline. If unemployment drops below this level, inflation will increase. Most economic research over the last two decades placed the NAIRU between 5.8 and 6.6 percent.

The operating differences between a legal target of four percent unemployment and a NAIRU target matter tremendously for the economy and the public....

[Feb 25, 2017] Iraq Is It Oil naked capitalism

Feb 25, 2017 | www.nakedcapitalism.com
By Arthur MacEwan. Originally published at Triple Crisis

The Issue Revisited

Around the time that the United States invaded Iraq, 14 years ago, I was in an auditorium at the University of Massachusetts Boston to hear then-Senator John Kerry try to justify the action. As he got into his speech, a loud, slow, calm voice came from the back of the room: "O – I – L." Kerry tried to ignore the comment. But, again and again, "O – I – L." Kerry simply went on with his prepared speech. The speaker from the back of the room did not continue long, but he had succeeded in determining the tenor of the day.

Looking back on U.S. involvement in the Iraq, it appears to have been largely a failure. Iraq, it turned out, had no "weapons of mass destruction," but this original rationalization for invasion offered by the U.S. government was soon replaced by the goal of "regime change" and the creation of a "democratic Iraq." The regime was changed, and Iraqi dictator Saddam Hussain was captured and executed. But it would be very had to claim that a democratic Iraq either exists or is in the making-to say nothing of the rise of the so-called Islamic State (ISIS) and the general destabilization in the Middle East, both of which the U.S. invasion of Iraq helped propel.

Yet, perhaps on another scale, the invasion would register as at least a partial success. This is the scale of O – I – L

The Profits from Oil

At the time of the U.S. invasion, I wrote an article for Dollars & Sense titled "Is It Oil?" (available online here ). I argued that, while the invasion may have had multiple motives, oil-or more precisely, profit from oil-was an important factor. Iraq, then and now, has huge proven oil reserves, not in the same league as Saudi Arabia, but in group of oil producing countries just behind the Saudis. It might appear, then, that the United States wanted access to Iraqi oil in order to meet the needs of our highly oil-dependent lifestyles in this country. After all, the United States today, with just over 4% of the world's population, accounts for 20% of the world's annual oil use; China, with around 20% of the world's population is a distant second in global oil use, at 13%. Even after opening new reserves in recent years, U.S. proven reserves amount to only 3% of the world total.

Except in extreme circumstances, however, access to oil is not a major problem for this county. And it was not in 2003. As I pointed out back then, the United States bought 284 million barrels of oil from Iraq in 2001, about 7% of U.S. imports, even while the two countries were in a virtual state of war. In 2015, only 30% as much oil came to the United States from Iraq, amounting to just 2.4% of total U.S. oil imports. Further, in 2015, while the United States has had extremely hostile relations with Venezuela, 24% of U.S. oil imports came from that country's nationalized oil industry. It would seem that, in the realm of commerce, bad political relations between buyers and sellers are not necessarily an obstacle.

For the U.S. government, the Iraq oil problem was not so much access, in the sense of meeting U.S. oil needs, as the fact that U.S. firms had been frozen out of Iraq since the country's oil industry was nationalized in 1972. They and the other oil "majors" based in U.S.-allied countries were not getting a share of the profits that were generated from the exploitation of Iraqi oil. Profits from oil exploitation come not only to the oil companies-ExxonMobil, Shell, Chevron, British Petroleum, and the other industry "majors"-but also to the companies that supply and operate equipment, drill wells, and provide other services that bring the oil out of the ground and to consumers around the world-for example, the U.S. firms Halliburton, Emerson, Baker Hughes, and others. They were also not getting a share of the Iraqi oil action. (Actually, when vice president to be Dick Cheney was running Halliburton, in the period before the invasion, the company managed to undertake some operations in Iraq through a subsidiary, in spite of federal restrictions preventing U.S. firms from doing business in Iraq.)

After the Troops

In the aftermath of the invasion and since most U.S. troops have been withdrawn, things have changed. "Prior to the 2003 invasion and occupation of Iraq, U.S. and other western oil companies were all but completely shut out of Iraq's oil market," oil industry analyst Antonia Juhasz told Al Jazeera in 2012. "But thanks to the invasion and occupation, the companies are now back inside Iraq and producing oil there for the first time since being forced out of the country in 1973."

From the perspective of U.S. firms the picture is mixed. Firms based in Russia and China have developed operations in Iraq, and even an Indonesian-based firm is involved. Still, ExxonMobil (see box) has established a significant stake in Iraq, having obtained leases on approximately 900,000 onshore acres and by the end of 2013 had developed several wells in Iraq's West Qurna field. Exxon also has agreements with the Kurdistan Regional Government in northern Iraq to explore for oil. Chevron holds an 80% stake and is the operator of the Qara Dagh block in the Kurdistan region of Iraq, but as of mid-2014 the project was still in the exploratory phase and there was no production. No other U.S. oil companies have developed operations in Iraq. The UK-headquartered BP (formerly British Petroleum) and the Netherlands-headquartered Shell, however, are also significantly engaged in Iraq.

While data are limited on the operations of U.S. and other oil service firms in Iraq, they seem to have done well. For example, according to a 2011 New York Times article:

The oil services companies Halliburton, Baker Hughes, Weatherford International [founded in Texas, now incorporated in Switzerland] and Schlumberger [based in France] already won lucrative drilling subcontracts and are likely to bid on many more. "Iraq is a huge opportunity for contractors," Alex Munton, a Middle East analyst for Wood Mackenzie, a research and consulting firm based in Edinburgh, said by telephone. "There will be an enormous scale of investment."

The Right to Access

While U.S. oil companies and oil service firms-as well as firms from other countries-are engaged in Iraq, they and their U.S. government supporters have not gained the full legal rights they would desire. In 2007, the U.S. government pressed the Iraqi government to pass the "Iraq Hydrocarbons Law." The law would, among other things, take the majority of Iraqi oil out of the hands of the Iraqi government and assure the right of foreign firms to control much of the oil for decades to come. The law, however, has never been enacted, first due to general opposition to a reversal the 1972 nationalization of the industry, and recently due to continuing disputes between the government in Baghdad and the government of the Kurdistan Region in northern Iraq.

U.S. foreign policy, as I elaborated in the 2003 article, has long been designed not simply to protect U.S.-based firms in their international operations, but to establish the right of the firms to access and security wherever around the world. Oil firms have been especially important in promoting and gaining from this right, but firms from finance to pharmaceuticals and many others have been beneficiaries and promoters of the policy.

Whatever else, as the Iraq and Middle East experience has demonstrated, this right comes at a high cost. The best estimate of the financial cost to the United States of the war in Iraq is $3 trillion. Between the 2003 invasion and early 2017, U.S. military forces suffered 4,505 fatalities in the war, and allied forces another 321. And, of course, most of all Iraqi deaths: estimates of the number of Iraqis killed range between 200,000 and 500,000.

Altandmain , February 25, 2017 at 1:03 am

Basically the US seems to have invaded for the enrichment of the multinational corporations at the expense of the rest of the world. Americans will pay a monetary price, but worse many have died and many more have lost their lives.

Even if it had gone to plan, the average American would not have benefited. They would have paid the costs for war. Let us face the reality. There was no noble intent in invading Iraq. It was all a lie.

The ridiculousness of Paul Wolfowitz and his claim that invading Iraq could be paid for through its oil revenue has become apparent. It has destroyed the stability of the area. We should nor idealize Saddam, who was a horrible dictator, but the idea that the US is going to be able to invade and impose its will was foolish.

There was never any need to invade Iraq. If oil was the goal, Washington DC could easily have lifted the sanctions around Iraq. I doubt that the neoconservatives believed that Saddam was developing nuclear weapons of destruction or had anything to do with the 9-11-2001 attacks, which is why they claimed they invaded.

If this madness does not stop, it will do much more damage, and like the Soviet Union, bankrupt the US.

Mike , February 25, 2017 at 1:06 am

Great overview of the real tragedy of Iraq-US companies having to share the spoils.

It reminds me of Russia: the US seethes because Putin is the one looting the country and not them.

Back in the 90s President Clinton issued countless demands to Yeltsin about oil pipelines and output increases, showing great impatience when the Russians dared to suggest environmental impact studies. (See the linked UPI article.) If only Putin would have let us frack the Kremlin he'd be our best friend!

http://www.upi.com/Archives/1994/09/28/Clinton-presses-Yeltsin-on-oil-deals/6188780724800/

[Feb 25, 2017] Due to overconsumption of oil inherent in neoliberalism with its crazy goods flows that might cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism as social system) can well go off the cliff when cheap oil is gone.

Feb 25, 2017 | economistsview.typepad.com
im1dc :

, February 25, 2017 at 10:06 AM
Gee, I can't imagine what could go wrong with this

Click and look at the map and inset to understand

Israel to become an energy, NG, superpower?

http://maritime-executive.com/article/noble-energy-sanctions-leviathan

"Noble Energy Sanctions Leviathan"

By MarEx...2017-02-24

"Noble Energy has sanctioned the first phase of the Leviathan natural gas project offshore Israel, with first gas targeted for the end of 2019.

Noble Energy is the operator of the Leviathan Field, which contains 22 trillion cubic feet (Tcf) of gross recoverable natural gas resources.

The announcement was hailed by Israeli Prime Minister Benjamin Netanyahu who has played a key role in negotiations with Noble. Netanyahu says the discovery of large reserves will bring energy self-sufficiency and billions of dollars in tax revenues, reports The Times of Israel, but critics say the deal gave excessively favorable terms to the government's corporate partners...

Production will be gathered at the field and delivered via two 73-mile flowlines to a fixed platform, with full processing capabilities, located approximately six miles offshore."...

im1dc : , February 25, 2017 at 10:08 AM
Update US Crude Oil production, market, and exports

http://maritime-executive.com/article/us-oil-exports-hit-record-levels

"U.S. Oil Exports Hit Record Levels"

By MarEx 2017-02-24

"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2 million barrels of crude per day, roughly double the levels seen at the end of last year.

Analysts told Bloomberg that the rising American exports are driven in large part by falling domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below the international Brent standard by $2 per barrel or more, and are now cheaper than some Middle Eastern grades of lesser quality. This makes American crude more attractive to Asian buyers.

There is also an incentive for traders to sell their oil abroad: U.S. storage is costly. If the price of crude is not expected to rise, brokers have no incentive to hang on to their supply and pay rent on a tank to put it in."...

ilsm -> im1dc... , February 25, 2017 at 01:16 PM
From the report:

I did not see any input to the NPR.

The greens might not be happy US is polluting to ship gasoline and distillates out!

ilsm -> ilsm... , February 25, 2017 at 01:19 PM
See: http://www.eia.gov/petroleum/supply/weekly/

Table 1, open the .xls see data 2 for Feb 17 2017 at the bottom.

im1dc -> ilsm... , February 25, 2017 at 02:00 PM
ilsm, that is the previous week I believe.
libezkova -> ilsm... , February 25, 2017 at 04:33 PM
You are just regular incompetent chichenhawk. And it shows. Try to read something about US oil industry before positing. It is actually a very fascinating topic. That's where the battle for survival of neoliberalism in the USA (with its rampant militarism and impoverishment of lower 50% of population) is now fought.

If you list also domestic consumption, you will understand that you are completely misunderstanding and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl; see ilsm post), not an exporter. You can consider it to be exported only after drinking something really strong.

It refines and re-export refined products and also export condensate and shale light oil that is used for dilution of heavy oils in Canada and Latin America. That's it.

US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for well started in 2009-2016), and if interest on already existing loans (all shale industry is deeply in debt; ) and minimum profitability (2.5% is factored in, probably $77.

That's why production is declining and will decline further is prices stay low because there is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In 2017 they are mostly gone, so what's left is not so attractive at the current prices. And this is an understatement.

The same is true to Canadian sands. Plans for expansion are now revised down and investments postponed.

So in order to sustain the US shale industry prices need to grow at least over $65 this year

And those war-crazy militarists from Obama administration essentially continued Bush II policies and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating conversion of passenger cards to hybrids (and electrical for short commutes).

The US as a country wasted its time and now is completely unprepared for down of oil age.

The net result of Obama policies is that SUVs became that most popular type of passenger cars in the USA. That can be called Iran revenge on the USA.

The conflict between Donald Trump and the US Deep State can be explained that deep state can't allow Trump détente with Russia and stopping wars on neoliberal expansion at Middle East. That's why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show him who is the boss and warn "You can be fired".

Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that might cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism as social system) can well go off the cliff when cheap oil is gone.

The only question is when it happens and estimates vary from 10 to 50 years.

So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years (1917-1991) by only something like 15 years.

[Feb 25, 2017] The push for economic oligarchy under neoliberalism is continual, so must be the push back.

Notable quotes:
"... We find that Citizens United increased the GOP's average seat share in the state legislature by five percentage points. ..."
"... But in states with weak unions and strong corporations, the decision appeared to increase Republican seat share by as much as 12 points. ..."
Feb 25, 2017 | economistsview.typepad.com
geoff : February 25, 2017 at 09:14 AM , 2017 at 09:14 AM
Our research focuses on state legislative elections because we can more easily isolate the effect of Citizens United compared with other factors that influence election outcomes at various levels (such as the popularity of the president). Before 2010, 23 states had bans on corporations and union funding of outside spending. As a result of the court's ruling, these states had to change their campaign laws. We can then compare the changes before and after Citizens United in these 23 states with the same changes in the 27 states whose laws did not change. The effect of the court's ruling is then simply the differences between these two before-and-after comparisons.

We find that Citizens United increased the GOP's average seat share in the state legislature by five percentage points. That is a large effect - large enough that, were it applied to the past twelve Congresses, partisan control of the House would have switched eight times. In line with a previous study, we also find that the vote share of Republican candidates increased three to four points, on average.

We also uncovered evidence that these results stem from the influence of corporations and unions. In states where union membership is relatively high and corporations relatively weak, Citizens United did not have a discernible effect on the partisan balance of the state legislature. But in states with weak unions and strong corporations, the decision appeared to increase Republican seat share by as much as 12 points.

https://electionlawblog.org/?p=91308

election rigging, long game version, and usually much more effective than imaginary interstate busing.

The push for economic oligarchy is continual, so must be the push back.

[Feb 25, 2017] Tyler Cowen as a yet another corrupt neoliberal economist

Feb 25, 2017 | www.nytimes.com

Peter K. said...February 25, 2017 at 08:20 AM

https://www.bloomberg.com/view/articles/2016-09-12/debating-government-s-role-in-boosting-growth

September 12, 2016

Tyler Cowen: There are a few reasons, but the internet may be the biggest. It is easier to have fun while unemployed. That's a social problem for some people.

Noah Smith: If that's true -- if we're seeing a greater preference for leisure -- why are we not seeing wages go up as a result? Is that market also broken?

Cowen: Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn and not get married. Is that more of a personal failure on the part of the worker than a market failure?

-------------------

And Sanjait likes Tyler Cowen. He's a scumbag.

[Feb 25, 2017] The essence of deep state meme is that color revolution ( nicknamed purple revolution ) is launched against Trump by a coalition of Democratic Party operatives, a faction of Wall Street (Globalist Billionaires), a faction of MIC, and powerful factions of three letter agencies (and first of all CIA).

Feb 25, 2017 | economistsview.typepad.com
ilsm -> Peter K.... February 25, 2017 at 01:52 PM , 2017 at 01:52 PM
Progressive dems would not have moles in the deep state!
im1dc -> ilsm... , February 25, 2017 at 02:10 PM
Give up the "deep state" meme, total nonsense.
libezkova -> im1dc... , February 25, 2017 at 04:43 PM
So you are denying that "color revolution" methods are now used against Trump administration.

Nice.

Compare with

http://beforeitsnews.com/politics/2017/01/trump-vs-cia-djt-forced-to-finish-the-fight-started-by-jfk-2876647.html

im1dc -> libezkova... , February 25, 2017 at 04:56 PM
This is what I posted and meant:

"Give up the "deep state" meme, total nonsense."

libezkova -> im1dc... , February 25, 2017 at 06:26 PM
The essence of "deep state" meme is that "color revolution" ( nicknamed "purple revolution") is launched against Trump by a coalition of Democratic Party operatives, a faction of Wall Street (Globalist Billionaires), a faction of MIC, and powerful factions of three letter agencies (and first of all CIA).

It's no coincidence that JFK wished he could splinter the CIA 'Into A Thousand Pieces And Scatter It Into The Winds'. And paid the ultimate price for this wish. The CIA coup like JFS assassination that involves removal of Trump from power is what the "deep state meme" currently implies.

http://themillenniumreport.com/2017/02/may-day-may-day-may-day/

== quote ==

The Deep State Conducts a Purple Revolution Against the Trump Administration

State of the Nation

There is now a full-scale clandestine revolutionary war being waged against the Trump Administration. The C.I.A. usually attempts a soft coup first at the direction of its masters in Deep State. When that's not successful in effectuating a regime change, they know the territory has been sufficiently softened up for the hot phase of the revolution.

In these United States of America, that revolution is known as the ongoing but rapidly intensifying Purple Revolution. This seditious revolution began the very day that President Trump won the election on November 8, 2016, if not before.

KEY POINTS:

• Deep State will not permit President Trump to govern as POTUS.

• Deep State uses the C.I.A. and the Mainstream Media (MSM) to run interference at every turn against the Trump Administration

• Deep State will continue to prosecute the revolution until Trump is removed from power

• Deep State will eventually attempt to oust the entire Trump Administration

These preceding bullet points constitute the current NWO globalist agenda being implemented throughout the USA in direct opposition to the Trump Administration. In other words, when Assistant to the President and White House Chief Strategist Steve Bannon said that the Mainstream Media (MSM) had morphed into the opposition party, he was speaking literally.

"Steve Bannon: 'I Could Care Less' About Repairing Relationship with 'Opposition Party' Media" - BREITBART

A Counter Declaration of War on the Mainstream Media

There you have it (see preceding link), the whole world is now witnessing an all-out war between the MSM and a sitting POTUS. This unparalleled conflict is not only being fought between the Mainstream Media and the Trump Administration, it's occurring throughout the entire body politic of the USA and beyond.

The U.S. citizenry saw as never before the complete lack of integrity exhibited by the MSM during the entire 2016 election cycle. Candidate Trump exposed the lying media and avalanche of fake news with his every news conference and campaign stop. In so doing, the whole world is now aware that the MSM can never - EVER - be trusted again.

Because the MSM is the primary mouthpiece of Deep State, a highly consequential decision was made by its concealed leadership to remove Trump from power with great haste and recklessness lest their Global Control Matrix experience an unprecedented collapse. Deep State knows full well that it's now in its death throes. And that such grave existential threats must be faced before its entire superstructure (and infrastructure) falls into it own footprint.

This 21st century "War of the Titans" has gotten so hot, in fact, that there is now no turning back for either side. IT WILL BE A FIGHT TO THE DEATH.

Because the Mainstream Media has been outed like never, the most likely outcome is that it will simply be shut down. The public domain is now replete with hard evidence proving treason and sedition perpetrated over many decades by the MSM. Once the American people have reviewed the relevant proof of high treason and crimes against humanity, it will only be a matter of MSM industrywide criminal prosecution.

Bear in mind that Deep State cannot function to any reasonable degree without total ownership and efficient functioning of the media. The C.I.A., as well as the other 16 US intelligence agencies, all require the media cover staunchly provided by the MSM. So does the Military-Industrial Complex, as does the much larger Government-Corporate Complex. Therefore, when the MSM finally crashes and burns, so will all of the other major entities which comprise the Deep State.

"MAY DAY! MAY DAY! MAY DAY!"

With this critical understanding it ought to be quite obvious that the next 120 days are pivotal for Deep State. Every single day that the Trump Administration is able to consolidate and increase its power, Deep State loses its influence throughout the US government and the world-at-large. Such a crucial attenuation of power will serve as the death knell of the Deep State within the American Republic.

Hence, there is now a great race against time for both sides of this epic war. The agents of Deep State clearly hope that a soft coup will be successful through a presidential impeachment or by other means. The C.I.A. recently executed such a strategy to 'peacefully' remove Dilma Rousseff, the 36th President of Brazil.

Make no mistake about it, if a soft coup is not successful, the agents of Deep State will commence the hot phase of their Purple Revolution. Everything points to a massive May Day stealth event. An unrivaled National Mall rally in D.C. attended by the many misguided groups which make up the Democratic Party is already in the works.

An enormous May Day protest could be used to manufacture a context in which a Maidan type event takes place (remember the violent uprising in Kiev, Ukraine). The Illuminati are notorious for using dates and numerology by which to stage their revolutions and civil wars over centuries (e.g. May Day parades and terror events). Just as the engineered uprising in Kiev was surreptitiously utilized to force Ukrainian President Viktor Yanukovych into exile, a similar trigger point could be fabricated by which the Bolshevik Left goes really crazy and tries to chase Trump from the White House.

[Feb 25, 2017] the Church of America the Redeemer

Notable quotes:
"... Under the circumstances, it's easy to forget that, back in 2003, he and other members of the Church of America the Redeemer devoutly supported the invasion of Iraq. They welcomed war. They urged it. They did so not because Saddam Hussein was uniquely evil-although he was evil enough-but because they saw in such a war the means for the United States to accomplish its salvific mission. Toppling Saddam and transforming Iraq would provide the mechanism for affirming and renewing America's "national greatness." ..."
"... In refusing to reckon with the results of the war he once so ardently endorsed, Brooks is hardly alone. Members of the Church of America the Redeemer, Democrats and Republicans alike, are demonstrably incapable of rendering an honest accounting of what their missionary efforts have yielded. ..."
"... Rather than requiring acts of contrition, the Church of America the Redeemer has long promulgated a doctrine of self-forgiveness, freely available to all adherents all the time. "You think our country's so innocent?" the nation's 45th president recently barked at a TV host who had the temerity to ask how he could have kind words for the likes of Russian President Vladimir Putin. Observers professed shock that a sitting president would openly question American innocence. ..."
"... In fact, Trump's response and the kerfuffle that ensued both missed the point. No serious person believes that the United States is "innocent." Worshipers in the Church of America the Redeemer do firmly believe, however, that America's transgressions, unlike those of other countries, don't count against it. Once committed, such sins are simply to be set aside and then expunged, a process that allows American politicians and pundits to condemn a "killer" like Putin with a perfectly clear conscience while demanding that Donald Trump do the same. ..."
Feb 25, 2017 | economistsview.typepad.com
ilsm : , February 25, 2017 at 01:50 PM
Spend 22 minutes listening to retired Army Col Bacevich concerning the Trump National Security Council.

https://warisboring.com/the-bannon-effect-and-a-brief-history-of-the-national-security-council-f5f4c584241b#.8dpdo8os5

Disclaimer: the contents do not reflect ilsm's perceptions and are Col Bacevich's.

libezkova -> ilsm... , February 25, 2017 at 04:53 PM
Thank you for the link.

Bacevich is an interesting thinker about the danger of the US militarism and neocon dominance since Reagan.

Recently he speculated about the existence in the USA of a dangerous cult "the Church of America the Redeemer" which is slightly broader than the concept of neocons. It is an apt synonym of American Exceptionalism, and American Messianism. See

http://www.theamericanconservative.com/articles/angst-in-the-church-of-america-the-redeemer/

BTW we can find members of "the Church of America the Redeemer" cult in this forum too: im1dc and Fred are obvious examples.

== quote ==

In terms of confessional fealty, his true allegiance is not to conservatism as such, but to the Church of America the Redeemer. This is a virtual congregation, albeit one possessing many of the attributes of a more traditional religion.

The Church has its own Holy Scripture, authenticated on July 4, 1776, at a gathering of 56 prophets. And it has its own saints, prominent among them the Good Thomas Jefferson, chief author of the sacred text (not the Bad Thomas Jefferson who owned and impregnated slaves); Abraham Lincoln, who freed said slaves and thereby suffered martyrdom (on Good Friday no less); and, of course, the duly canonized figures most credited with saving the world itself from evil: Winston Churchill and Franklin Roosevelt, their status akin to that of saints Peter and Paul in Christianity.

The Church of America the Redeemer even has its own Jerusalem, located on the banks of the Potomac, and its own hierarchy, its members situated nearby in High Temples of varying architectural distinction.

This ecumenical enterprise does not prize theological rigor. When it comes to shalts and shalt nots, it tends to be flexible, if not altogether squishy. It demands of the faithful just one thing: a fervent belief in America's mission to remake the world in its own image. Although in times of crisis Brooks has occasionally gone a bit wobbly, he remains at heart a true believer.

In a March 1997 piece for The Weekly Standard, his then-employer, he summarized his credo. Entitled "A Return to National Greatness," the essay opened with a glowing tribute to the Library of Congress and, in particular, to the building completed precisely a century earlier to house its many books and artifacts. According to Brooks, the structure itself embodied the aspirations defining America's enduring purpose. He called particular attention to the dome above the main reading room decorated with a dozen "monumental figures" representing the advance of civilization and culminating in a figure representing America itself. Contemplating the imagery, Brooks rhapsodized:

The theory of history depicted in this mural gave America impressive historical roots, a spiritual connection to the centuries. And it assigned a specific historic role to America as the latest successor to Jerusalem, Athens, and Rome. In the procession of civilization, certain nations rise up to make extraordinary contributions At the dawn of the 20th century, America was to take its turn at global supremacy. It was America's task to take the grandeur of past civilizations, modernize it, and democratize it. This common destiny would unify diverse Americans and give them a great national purpose.

This February, 20 years later, in a column with an identical title, but this time appearing in the pages of his present employer, the New York Times, Brooks revisited this theme. Again, he began with a paean to the Library of Congress and its spectacular dome with its series of "monumental figures" that placed America "at the vanguard of the great human march of progress." For Brooks, those 12 allegorical figures convey a profound truth.

America is the grateful inheritor of other people's gifts. It has a spiritual connection to all people in all places, but also an exceptional role. America culminates history. It advances a way of life and a democratic model that will provide people everywhere with dignity. The things Americans do are not for themselves only, but for all mankind.

In 1997, in the midst of the Clinton presidency, Brooks had written that "America's mission was to advance civilization itself." In 2017, as Donald Trump gained entry into the Oval Office, he embellished and expanded that mission, describing a nation "assigned by providence to spread democracy and prosperity; to welcome the stranger; to be brother and sister to the whole human race."

Back in 1997, "a moment of world supremacy unlike any other," Brooks had worried that his countrymen might not seize the opportunity that was presenting itself. On the cusp of the twenty-first century, he worried that Americans had "discarded their pursuit of national greatness in just about every particular." The times called for a leader like Theodore Roosevelt, who wielded that classic "big stick" and undertook monster projects like the Panama Canal. Yet Americans were stuck instead with Bill Clinton, a small-bore triangulator. "We no longer look at history as a succession of golden ages," Brooks lamented. "And, save in the speeches of politicians who usually have no clue what they are talking about," America was no longer fulfilling its "special role as the vanguard of civilization."

By early 2017, with Donald Trump in the White House and Steve Bannon whispering in his ear, matters had become worse still. Americans had seemingly abandoned their calling outright. "The Trump and Bannon anschluss has exposed the hollowness of our patriotism," wrote Brooks, inserting the now-obligatory reference to Nazi Germany. The November 2016 presidential election had "exposed how attenuated our vision of national greatness has become and how easy it was for Trump and Bannon to replace a youthful vision of American greatness with a reactionary, alien one." That vision now threatens to leave America as "just another nation, hunkered down in a fearful world."

What exactly happened between 1997 and 2017, you might ask? What occurred during that "moment of world supremacy" to reduce the United States from a nation summoned to redeem humankind to one hunkered down in fear?

Trust Brooks to have at hand a brow-furrowing explanation. The fault, he explains, lies with an "educational system that doesn't teach civilizational history or real American history but instead a shapeless multiculturalism," as well as with "an intellectual culture that can't imagine providence." Brooks blames "people on the left who are uncomfortable with patriotism and people on the right who are uncomfortable with the federal government that is necessary to lead our project."

An America that no longer believes in itself-that's the problem. In effect, Brooks revises Norma Desmond's famous complaint about the movies, now repurposed to diagnose an ailing nation: it's the politics that got small.

Nowhere does he consider the possibility that his formula for "national greatness" just might be so much hooey. Between 1997 and 2017, after all, egged on by people like David Brooks, Americans took a stab at "greatness," with the execrable Donald Trump now numbering among the eventual results.

Invading Greatness

Say what you will about the shortcomings of the American educational system and the country's intellectual culture, they had far less to do with creating Trump than did popular revulsion prompted by specific policies that Brooks, among others, enthusiastically promoted. Not that he is inclined to tally up the consequences. Only as a sort of postscript to his litany of contemporary American ailments does he refer even in passing to what he calls the "humiliations of Iraq."

A great phrase, that. Yet much like, say, the "tragedy of Vietnam" or the "crisis of Watergate," it conceals more than it reveals. Here, in short, is a succinct historical reference that cries out for further explanation. It bursts at the seams with implications demanding to be unpacked, weighed, and scrutinized. Brooks shrugs off Iraq as a minor embarrassment, the equivalent of having shown up at a dinner party wearing the wrong clothes.

Under the circumstances, it's easy to forget that, back in 2003, he and other members of the Church of America the Redeemer devoutly supported the invasion of Iraq. They welcomed war. They urged it. They did so not because Saddam Hussein was uniquely evil-although he was evil enough-but because they saw in such a war the means for the United States to accomplish its salvific mission. Toppling Saddam and transforming Iraq would provide the mechanism for affirming and renewing America's "national greatness."

Anyone daring to disagree with that proposition they denounced as craven or cowardly. Writing at the time, Brooks disparaged those opposing the war as mere "marchers." They were effete, pretentious, ineffective, and absurd. "These people are always in the streets with their banners and puppets. They march against the IMF and World Bank one day, and against whatever war happens to be going on the next They just march against."

Perhaps space constraints did not permit Brooks in his recent column to spell out the "humiliations" that resulted and that even today continue to accumulate. Here in any event is a brief inventory of what that euphemism conceals: thousands of Americans needlessly killed; tens of thousands grievously wounded in body or spirit; trillions of dollars wasted; millions of Iraqis dead, injured, or displaced; this nation's moral standing compromised by its resort to torture, kidnapping, assassination, and other perversions; a region thrown into chaos and threatened by radical terrorist entities like the Islamic State that U.S. military actions helped foster. And now, if only as an oblique second-order bonus, we have Donald Trump's elevation to the presidency to boot.

In refusing to reckon with the results of the war he once so ardently endorsed, Brooks is hardly alone. Members of the Church of America the Redeemer, Democrats and Republicans alike, are demonstrably incapable of rendering an honest accounting of what their missionary efforts have yielded.

Brooks belongs, or once did, to the Church's neoconservative branch. But liberals such as Bill Clinton, along with his secretary of state Madeleine Albright, were congregants in good standing, as were Barack Obama and his secretary of state Hillary Clinton. So, too, are putative conservatives like Senators John McCain, Ted Cruz, and Marco Rubio, all of them subscribing to the belief in the singularity and indispensability of the United States as the chief engine of history, now and forever.

Back in April 2003, confident that the fall of Baghdad had ended the Iraq War, Brooks predicted that "no day will come when the enemies of this endeavor turn around and say, 'We were wrong. Bush was right.'" Rather than admitting error, he continued, the war's opponents "will just extend their forebodings into a more distant future."

Yet it is the war's proponents who, in the intervening years, have choked on admitting that they were wrong. Or when making such an admission, as did both John Kerry and Hillary Clinton while running for president, they write it off as an aberration, a momentary lapse in judgment of no particular significance, like having guessed wrong on a TV quiz show.

Rather than requiring acts of contrition, the Church of America the Redeemer has long promulgated a doctrine of self-forgiveness, freely available to all adherents all the time. "You think our country's so innocent?" the nation's 45th president recently barked at a TV host who had the temerity to ask how he could have kind words for the likes of Russian President Vladimir Putin. Observers professed shock that a sitting president would openly question American innocence.

In fact, Trump's response and the kerfuffle that ensued both missed the point. No serious person believes that the United States is "innocent." Worshipers in the Church of America the Redeemer do firmly believe, however, that America's transgressions, unlike those of other countries, don't count against it. Once committed, such sins are simply to be set aside and then expunged, a process that allows American politicians and pundits to condemn a "killer" like Putin with a perfectly clear conscience while demanding that Donald Trump do the same.

What the Russian president has done in Crimea, Ukraine, and Syria qualifies as criminal. What American presidents have done in Iraq, Afghanistan, and Libya qualifies as incidental and, above all, beside the point.

Rather than confronting the havoc and bloodshed to which the United States has contributed, those who worship in the Church of America the Redeemer keep their eyes fixed on the far horizon and the work still to be done in aligning the world with American expectations. At least they would, were it not for the arrival at center stage of a manifestly false prophet who, in promising to "make America great again," inverts all that "national greatness" is meant to signify.

For Brooks and his fellow believers, the call to "greatness" emanates from faraway precincts-in the Middle East, East Asia, and Eastern Europe. For Trump, the key to "greatness" lies in keeping faraway places and the people who live there as faraway as possible. Brooks et al. see a world that needs saving and believe that it's America's calling to do just that. In Trump's view, saving others is not a peculiarly American responsibility. Events beyond our borders matter only to the extent that they affect America's well-being. Trump worships in the Church of America First, or at least pretends to do so in order to impress his followers.

That Donald Trump inhabits a universe of his own devising, constructed of carefully arranged alt-facts, is no doubt the case. Yet, in truth, much the same can be said of David Brooks and others sharing his view of a country providentially charged to serve as the "successor to Jerusalem, Athens, and Rome." In fact, this conception of America's purpose expresses not the intent of providence, which is inherently ambiguous, but their own arrogance and conceit. Out of that conceit comes much mischief. And in the wake of mischief come charlatans like Donald Trump.

Andrew J. Bacevich, a TomDispatch regular, is the author of America's War for the Greater Middle East: A Military History, now out in paperback.

[Feb 25, 2017] Unemployment versus Underemployment: Assessing Labor Market Slack

Feb 25, 2017 | economistsview.typepad.com
Unemployment versus Underemployment: Assessing Labor Market Slack : The U-3 unemployment rate has returned to prerecession levels and is close to estimates of its longer-run sustainable level. Yet other indicators of slack, such as the U-6 statistic, which includes people working part-time but wanting to work full-time (often referred to as part-time for economic reasons, or PTER), has not declined as quickly or by as much as the U-3 unemployment rate.

If unemployment and PTER reflect the same business-cycle effects, then they should move pretty much in lockstep. But as the following chart shows, such uniformity hasn't generally been the case. In the most recent recovery, unemployment started declining in 2010, but PTER started to move substantially lower beginning only in 2013. The upshot is that for each unemployed worker, there are now many more involuntary part-time workers than in the past.

anne : , February 21, 2017 at 01:01 PM
https://fred.stlouisfed.org/graph/?g=cNuM

January 4, 2017

Unemployment and Unemployment-Underemployment * rates, 1994-2017

* Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers; age 16 and over.


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

January 4, 2017

Unemployment and Unemployment-Underemployment * rates, 1994-2017

* Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers; age 16 and over.

(Indexed to 1994)

New Deal democrat : , February 21, 2017 at 01:19 PM
"during the last recession, firms reduced the hours of workers in low-skill jobs more than they cut the number of low-skill jobs"

I believe this is the correct explanation. I used to tack growth in hours vs. growth in payrolls, and what I found was that, had the 2008 recession followed the pattern of previous recessions, the peak unemployment rate would have been considerably higher. Let me do a little digging ....

New Deal democrat -> New Deal democrat... , February 21, 2017 at 01:29 PM
Here we go: aggregate hours vs. aggregate payrolls (indexed to 100 in 1964):

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

The value reached its lowest level ever in 2009. In other words, relative more hours than jobs were cut in the Great Recession, even compared to other recessions.

anne -> New Deal democrat... , February 21, 2017 at 05:13 PM
Nicely done.

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

February 21, 2017

Aggregate Weekly Hours for Production and Nonsupervisory Employees as a percent of Total Nonfarm Employees, 1980-2017

(Indexed to 1980)

anne -> anne... , February 21, 2017 at 03:37 PM
http://cepr.net/blogs/beat-the-press/trump-and-trade-he-s-largely-right

February 21, 2017

Trump and Trade: He's Largely Right

-- Dean Baker

pgl -> anne... , February 21, 2017 at 03:57 PM
Dean covers a ton of material here. One is his points is right in one sense. We are below full employment so we need some sort of aggregate demand expansion. Would trade protection do this for the US? Perhaps if we had fixed exchange rates and we did not suffer a trade war. But as Dean has noted elsewhere, we need more expansionary monetary policy. Dean repeats something that Jared Bernstein wrote:

'If we wanted better data on bilateral trade flows, then it would be desirable to pull out the re-exports from both our exports to Canada and our imports from Germany. This adjustment would make our trade deficit with Canada appear larger and trade deficit with Germany smaller, but would leave our total trade balance unchanged.'

So Dean and Jared thinks that a US multinational that buys a product from Mexico at $80 which ultimately sells in Canada for $100 charges the Canadian distribution affiliate only $80? Dean knows better as he in the past has written about transfer pricing. No - transfer pricing games do affect the current reporting of the trade balance. Dean needs to read Brad Setser.

[Feb 25, 2017] Trump and Trade He's Largely Right Beat the Press Blogs Publications The Center for Economic and Policy Research

Feb 25, 2017 | cepr.net
According to CBO , potential GDP for the 4 th quarter of 2016 was $19,049 billion. This is 1.0 percent higher than the estimate of GDP for the quarter of $18,860.8 billion. This means that if CBO is right, if there had been more demand in the economy, for example due to imports being replaced by domestically produced goods, GDP could have been 1.0 percent higher last quarter.

Of course CBO's estimates of potential GDP are not especially accurate. Its most recent estimates for potential GDP in 2016 are more than 10 percent below what it had projected for potential GDP in 2016 back in 2008, before the severity of the crash was recognized. It is possible it overstated potential by a huge amount in 2008, but it is also possible it is understating potential today. It also hugely understated potential GDP in the mid-1990s, with 2000 GDP coming in more than 5 percent above the estimate of potential that CBO made in 1996. In other words, it would not be absurd to think that the economy could sustain a level of output that is 2.0 percent above the current level. (The fact that the employment rate of prime age workers [ages 25-54] is still 4.0 percentage points below the 2000 peak is certainly consistent with this view.)

Suppose that GDP were consistently 2.0 percent higher than current projections over the next decade due to a lower trade deficit. This would imply an additional $4.6 trillion in output over this period. If the government captures 30 percent of this in higher taxes and lower spending on transfer programs like unemployment insurance and food stamps, this would imply a reduction in the projected deficit of $1.38 trillion over the decade. That's not quite the $1.74 trillion projected by Navarro, but close enough to make the derision unwarranted.

In terms of how you get a lower trade deficit, Navarro's strategy of beating up on China is probably not the best way to go. But there is in fact precedent for the United States negotiating a lower value for the dollar under President Reagan, which had the desired effect of reducing the trade deficit.

There is no obvious reason it could not pursue a similar path today, especially since it is widely claimed in business circles that China actually wants to raise the value of its currency. The U.S. could help it.

The second area of seemingly gratuitous Trump trade bashing comes from a Wall Street Journal news article on the Trump administration's efforts to correct for re-exports in trade measures. Before getting to the article, it is important to understand what is at issue.

Most of what the United States exports to countries like Mexico, Japan, or elsewhere are goods and services produced in the United States. However, some portion of the goods that we export to these countries consists of items imported from other countries which are just transshipped through the United States.

The classic example would be if we offloaded 100 BMWs on a ship in New York and then 20 were immediately sent up to Canada to be sold there. The way we currently count exports and imports, we would count the 20 BMWs as exports to Canada and also as imports from Germany. These re-exports have zero impact on our aggregate trade balance, but they do exaggerate out exports to Canada and our imports from Germany.

If we wanted better data on bilateral trade flows, then it would be desirable to pull out the re-exports from both our exports to Canada and our imports from Germany. This adjustment would make our trade deficit with Canada appear larger and trade deficit with Germany smaller, but would leave our total trade balance unchanged.

This better measure of trade flows would be useful information to have if we wanted to know what happened to trade with a specific country following a policy change, for example the signing of a trade deal like NAFTA. The inclusion of re-exports in our export data would distort what had happened to actual flows of domestically produced exports and imports for domestic consumption.

The United States International Trade Commission already produces a measure of trade balances that excludes imports that are re-exported. However this measure is still not an accurate measure of bilateral trade balances since it still includes the re-exports on the import side. In the case mentioned above, it would include the BMWs imported from Germany that were immediately sent to Canada, as imports. In principle, we should be able to construct a measure that excludes these items on the import side as well. If this is what the Trump administration is trying to do, then it is asking for a perfectly reasonable adjustment to the data.

This is where we get to the WSJ article. According to the piece, the Trump administration was asking the Commerce Department to produce measures of bilateral trade balances that took out the re-exports on the export side, but left them in on the import side. This would have the effect of artificially inflating our trade deficit with a bogus number. If this is in fact what the Trump administration is trying to do, then we should be shooting at them with all guns. (This is metaphorical folks, I'm not advocating violence.)

However some skepticism might be warranted at this point. No one with a name actually said the Trump administration asked for this bogus measure of trade balances. The sole source listed is "one person familiar with the discussions."

There was an official statement from the Commerce Department's Bureau of Economic Analysis (BEA), which collects and compiles the data:

"Any internal discussions about data collection methods are no more than the continuation of a longstanding debate and are part of the bureau's normal process as we strive to provide the most precise statistics possible."

I take very seriously efforts to mess with the data. We are fortunate to have independent statistical agencies with dedicated civil servants who take their work very seriously. However we should wait until we have a bit more solid evidence before assuming that the Trump administration is trying to interfere in their independence, as opposed to trying to make a totally legitimate adjustment to the data that the BEA staff would almost certainly agree is an improvement.

[Feb 25, 2017] DeLong as t enured prima donna who is immune from his own damage.

Feb 25, 2017 | economistsview.typepad.com
Tom aka Rusty -> Peter K.... February 21, 2017 at 10:51 AM , 2017 at 10:51 AM
If I'm not mistaken Delong seems to think the US government has a greater interest in aiding Chinese workers than Us workers.

Tenured prima donna who is immune from his own damage.

[Feb 25, 2017] The main challenges in this new era is to reduce the level of inequality from neoliberal level to New Deal levels

Notable quotes:
"... The Democrats' central weakness comes from being a party of business but having to pretend otherwise. ..."
"... Since Donald Trump was inaugurated as the president of the United States, things have been moving so quickly it's hard to pause and take stock of our surroundings - let alone evaluate how we arrived at this nightmarish place. ..."
"... 'Ironically, both Stiglitz and Sanders have declared themselves to be democrats" ..."
"... I was a Democrat before and would be again. But, that would require that the neocons and neoliberals would be replaced by progressives. ..."
"... Shumer was elected Senate minority leader and that is a bad sign to me. He is sponsored by both neocons and neoliberals. ..."
"... Joe wants to be allowed to speak his piece. If he irritates the plutocrats too much they will cut off his access to media. ..."
Feb 25, 2017 | economistsview.typepad.com
RGC : February 21, 2017 at 07:31 AM

Re: Joe Stiglitz:

Joe says: "One of the main challenges in this new era will be to remain vigilant and, whenever and wherever necessary, to resist."

I disagree. I think we need a clearly articulated alternative to Trump and I think Joe provided one in his recent comment:

Joseph Stiglitz Says Standard Economics Is Wrong. Inequality and Unearned Income Kills the Economy

The rules of the game can be changed to reverse inequality

http://evonomics.com/joseph-stiglitz-inequality-unearned-income/

In that comment Joe says:

Reversing inequality

A wide range of policies can help reduce inequality.

Policies should be aimed at reducing inequalities both in market income and in the post-tax and-transfer incomes. The rules of the game play a large role in determining market distribution- in preventing discrimination, in creating bargaining rights for workers, in curbing monopolies and the powers of CEOs to exploit firms' other stakeholders and the financial sector to exploit the rest of society. These rules were largely rewritten during the past thirty years in ways which led to more inequality and poorer overall economic performance. Now they must be rewritten once again, to reduce inequality and strengthen the economy, for instance, by discouraging the short-termism that has become rampant in the financial and corporate sector.

Reforms include more support for education, including pre-school; increasing the minimum wage; strengthening earned-income tax credits; strengthening the voice of workers in the workplace, including through unions; and more effective enforcement of anti-discrimination laws. But there are four areas in particular that could make inroads in the high level of inequality which now exists.

First, executive compensation (especially in the US) has become excessive, and it is hard to justify the design of executive compensation schemes based on stock options.

Executives should not be rewarded for improvements in a firm's stock market performance in which they play no part. If the Federal Reserve lowers interest rates, and that leads to an increase in stock market prices, CEOs should not get a bonus as a result. If oil prices fall, and so profits of airlines and the value of airline stocks increase, airline CEOs should not get a bonus. There is an easy way of taking account of these gains (or losses) which are not attributable to the efforts of executives: basing performance pay on the relative performance of firms in comparable circumstances. The design of good compensation schemes that do this has been well understood for more than a third of a century, and yet executives in major corporations have almost studiously resisted these insights. They have focused more on taking advantages of deficiencies in corporate governance and the lack of understanding of these issues by many shareholders to try to enhance their earnings- getting high pay when share prices increase, and also when share prices fall. In the long run, as we have seen, economic performance itself is hurt.

Second, macroeconomic policies are needed that maintain economic stability and full employment. High unemployment most severely penalises those at the bottom and the middle of the income distribution. Today, workers are suffering thrice over: from high unemployment, weak wages and cutbacks in public services, as government revenues are less than they would be if economies were functioning well.

As we have argued, high inequality has weakened aggregate demand. Fuelling asset price bubbles through hyper-expansive monetary policy and deregulation is not the only possible response. Higher public investment- in infrastructures, technology and education- would both revive demand and alleviate inequality, and this would boost growth in the long-run and in the short-run. According to a recent empirical study by the IMF, well-designed public infrastructure investment raises output both in the short and long term, especially when the economy is operating below potential. And it doesn't need to increase public debt in terms of GDP: well-implemented infrastructure projects would pay for themselves, as the increase in income (and thus in tax revenues) would more than offset the increase in spending.

Third, public investment in education is fundamental to address inequality. A key determinant of workers' income is the level and quality of education. If governments ensure equal access to education, then the distribution of wages will reflect the distribution of abilities (including the ability to benefit from education) and the extent to which the education system attempts to compensate for differences in abilities and backgrounds. If, as in the United States, those with rich parents usually have access to better education, then one generation's inequality will be passed on to the next, and in each generation, wage inequality will reflect the income and related inequalities of the last.

Fourth, these much-needed public investments could be financed through fair and full taxation of capital income. This would further contribute to counteracting the surge in inequality: it can help bring down the net return to capital, so that those capitalists who save much of their income won't see their wealth accumulate at a faster pace than the growth of the overall economy, resulting in growing inequality of wealth. Special provisions providing for favourable taxation of capital gains and dividends not only distort the economy, but, with the vast majority of the benefits going to the very top, increase inequality. At the same time they impose enormous budgetary costs: 2 trillion dollars from 2013 to 2023 in the US, according to the Congressional Budget Office. The elimination of the special provisions for capital gains and dividends, coupled with the taxation of capital gains on the basis of accrual, not just realisations, is the most obvious reform in the tax code that would improve inequality and raise substantial amounts of revenues. There are many others, such as a good system of inheritance and effectively enforced estate taxation.

Redefining economic performance

We used to think of there being a trade-off: we could achieve more equality, but only at the expense of overall economic performance. It is now clear that, given the extremes of inequality being reached in many rich countries and the manner in which they have been generated, greater equality and improved economic performance are complements.

This is especially true if we focus on appropriate measures of growth. If we use the wrong metrics, we will strive for the wrong things. As the international Commission on the Measurement of Economic Performance and Social Progress argued, there is a growing global consensus that GDP does not provide a good measure of overall economic performance. What matters is whether growth is sustainable, and whether most citizens see their living standards rising year after year.

Since the beginning of the new millennium, the US economy, and that of most other advanced countries, has clearly not been performing. In fact, for three decades, real median incomes have essentially stagnated. Indeed, in the case of the US, the problems are even worse and were manifest well before the recession: in the past four decades average wages have stagnated, even though productivity has drastically increased.

As this essay has emphasised, a key factor underlying the current economic difficulties of rich countries is growing inequality. We need to focus not on what is happening on average- as GDP leads us to do- but on how the economy is performing for the typical citizen, reflected for instance in median disposable income. People care about health, fairness and security, and yet GDP statistics do not reflect their decline. Once these and other aspects of societal well-being are taken into account, recent performance in rich countries looks much worse.

The economic policies required to change this are not difficult to identify. We need more investment in public goods; better corporate governance, antitrust and anti-discrimination laws; a better regulated financial system; stronger workers' rights; and more progressive tax and transfer policies. By 'rewriting the rules' governing the market economy in these ways, it is possible to achieve greater equality in both the pre- and post-tax and transfer distribution of income, and thereby stronger economic performance.


[Joe had it right with this essay and progressives should elaborate and emphasize this message - not just rant about Trump.]

[The whole essay is worth reading, imo.]

RGC -> RGC... , February 21, 2017 at 07:42 AM
I don't trust the Democratic party.

I fear that if they did defeat trump, they would go back to the same old policies that have given us this mess.

I want to see new leadership that commits to new policies like those articulated by Joe Stiglitz and Bernie Sanders.

I don't want to work for them until I see new policies emerge.

pgl -> RGC... , February 21, 2017 at 07:45 AM
Max Sawicky has a new blog. You might enjoy this description of what his new blog will be about:

http://thepopulist.buzz/2017/02/16/who-we-are-what-we-do/

RGC -> pgl... , February 21, 2017 at 08:04 AM
Thanks for the link.
Peter K. -> pgl... , February 21, 2017 at 08:15 AM
CNN is running a debate tomorrow night 10 eastern between Perez and Ellison. Who are you supporting, if anyone?
libezkova -> RGC... , February 21, 2017 at 07:56 AM
"I don't trust the Democratic party."

That's the key point of the whole discussion. Dems are just a party of neoliberals. Who are in the pocket of Wall Street.

So they are in the pocket of the same guys who bought Republicans (and both parties are also puppets of MIC -- with Dems becoming the major War party; not that different from neocons ).

Stiglitz actually is very shy to criticize neoliberal "cult of GDP":
== quote ==
As this essay has emphasised, a key factor underlying the current economic difficulties of rich countries is growing inequality. We need to focus not on what is happening on average - as GDP leads us to do- but on how the economy is performing for the typical citizen, reflected for instance in median disposable income.

People care about health, fairness and security, and yet GDP statistics do not reflect their decline.

Once these and other aspects of societal well-being are taken into account, recent performance in rich countries looks much worse.

== end of quote ==

This is why "pro growth liberals" are just crooks in disguise... With a smoke screen of mathematical nonsense and obscure terminology to cover their tracks.

RGC -> libezkova... , February 21, 2017 at 08:12 AM
"This is why "pro growth liberals" are just crooks in disguise... With a smoke screen of mathematical nonsense and obscure terminology to cover their tracks."

Agreed. They originated with John Bates Clark and the neoclassical concept of marginal utility:

https://en.wikipedia.org/wiki/John_Bates_Clark

kurt -> RGC... , February 21, 2017 at 11:56 AM
So you don't think Marginal Utility is a thing? And that it would be good to ignore this thing that you believe doesn't exist? Wow.
RGC -> kurt... , February 21, 2017 at 12:11 PM
I think it is a concept that was used by Clark and other neoclassicals to counter Henry George's arguments for a tax on rentiers and then later to obfuscate the role played by finance:

Henry George and john Bates Clark

Henry George was the most popular economist of his day. Why did "elite" economists choose to follow the lead of John Bates Clark instead of George?
IOW, elite economists had various theories to choose from. Why did they choose a theory that neglcted unearned income?
.........................................................
"RA: So let me suggest that there is an alternative, and get your thoughts on this, because this idea has run its course. People are now starting to wake up and say" enough." You've written a lot about unearned versus earned wealth – unearned wealth or unearned increment, if you like – and it goes back to a man called John Bates Clark. He was one of the first neoclassical economists. I think I'm right in saying that. Just talk a bit about him, he said there was no differentiation, is that right?
MH: Yes.
RA: And that seemingly innocuous proclamation has had huge effects.

MH: By the 1870s and '80s there was a lot of pressure in all countries, especially in the United States, by socialists on the one hand and followers of the journalist Henry George on the other. George wanted to tax away the land's economic rent and use that as the tax base, instead of taxing labor and industry. So John Bates Clark wrote about the philosophy of wealth, and said "There's no such thing as unearned income. Everything that the economists before me have written is wrong. Everybody earns exactly what they contribute to national product and that means that whatever their earnings are will be added to national product.""

http://michael-hudson.com/2016/12/innocuous-proclaimations/
..........................................................
Henry George (September 2, 1839 – October 29, 1897) was an American political economist, journalist, and philosopher. His immensely popular writing is credited with sparking several reform movements of the Progressive Era, and inspiring the broad economic philosophy known as Georgism, based on the belief that people should own the value they produce themselves, but that the economic value derived from land (including natural resources) should belong equally to all members of society.
His most famous work, Progress and Poverty (1879), sold millions of copies worldwide, probably more than any other American book before that time. The treatise investigates the paradox of increasing inequality and poverty amid economic and technological progress, the cyclic nature of industrialized economies, and the use of rent capture such as land value tax and other anti-monopoly reforms as a remedy for these and other social problems.
............................................
Furthermore, on a visit to New York City, he was struck by the apparent paradox that the poor in that long-established city were much worse off than the poor in less developed California. These observations supplied the theme and title for his 1879 book Progress and Poverty, which was a great success, selling over 3 million copies. In it George made the argument that a sizeable portion of the wealth created by social and technological advances in a free market economy is possessed by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the main cause of poverty. George considered it a great injustice that private profit was being earned from restricting access to natural resources while productive activity was burdened with heavy taxes, and indicated that such a system was equivalent to slavery – a concept somewhat similar to wage slavery. This is also the work in which he made the case for a land value tax in which governments would tax the value of the land itself, thus preventing private interests from profiting upon its mere possession, but allowing the value of all improvements made to that land to remain with investors.[27][28]
................................
https://en.wikipedia.org/wiki/Henry_George
..................................................
John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist. He was one of the pioneers of the marginalist revolution and opponent to the Institutionalist school of economics, and spent most of his career as professor at Columbia University.
............................................................
The foundation of Clark's further work was competition: "If nothing suppresses competition, progress will continue forever".[8] Clark: "The science adapted is economic Darwinism. Though the process was savage, the outlook which it afforded was not wholly evil. The survival of crude strength was, in the long run, desirable".[9] This was the fundament to develop the theory which made him famous: Given competition and homogeneous factors of production labor and capital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital.

This theorem is a cornerstone of neoclassical micro-economics.
Clark stated it in 1891[10] and more elaborated 1899 in The Distribution of Wealth.[11] The same theorem was formulated later independently by John Atkinson Hobson (1891) and Philip Wicksteed (1894).

The political message of this theorem is: "[W]hat a social class gets is, under natural law, what it contributes to the general output of industry."[12]

......................................
https://en.wikipedia.org/wiki/John_Bates_Clark
............................
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge".[1] According to The Chronicle of Higher Education, it "is widely regarded as one of the field's most prestigious awards, perhaps second only to the Nobel Memorial Prize in Economic Sciences."[2] The award was made biennially until 2007, but is being awarded every year from 2009 because many deserving went unawarded.[3] The committee cited economists such as Edward Glaeser and John A. List in campaigning that the award should be annual. Named after the American economist John Bates Clark (1847–1938), it is considered one of the two most prestigious awards in the field of economics, along with the Nobel Prize.
https://en.wikipedia.org/wiki/John_Bates_Clark_Medal
.....................................................

RGC -> RGC... , February 21, 2017 at 12:23 PM
Furthermore;

Cambridge capital controversy:

https://en.wikipedia.org/wiki/Cambridge_capital_controversy

"It is important, for the record, to recognize that key participants in the debate openly admitted their mistakes. Samuelson's seventh edition of Economics was purged of errors. Levhari and Samuelson published a paper which began, 'We wish to make it clear for the record that the nonreswitching theorem associated with us is definitely false. We are grateful to Dr. Pasinetti...' (Levhari and Samuelson 1966). Leland Yeager and I jointly published a note acknowledging his earlier error and attempting to resolve the conflict between our theoretical perspectives. (Burmeister and Yeager, 1978).

However, the damage had been done, and Cambridge, UK, 'declared victory': Levhari was wrong, Samuelson was wrong, Solow was wrong, MIT was wrong and therefore neoclassical economics was wrong. As a result there are some groups of economists who have abandoned neoclassical economics for their own refinements of classical economics. In the United States, on the other hand, mainstream economics goes on as if the controversy had never occurred. Macroeconomics textbooks discuss 'capital' as if it were a well-defined concept - which it is not, except in a very special one-capital-good world (or under other unrealistically restrictive conditions). The problems of heterogeneous capital goods have also been ignored in the 'rational expectations revolution' and in virtually all econometric work." (Burmeister 2000)

RGC -> RGC... , February 21, 2017 at 12:29 PM
Wow.
yuan -> libezkova... , February 21, 2017 at 12:17 PM

Too uninformed and angry to realize that Stiglitz has focused on inequality and criticized the use of GDP to measure societal economic activity.


https://www.theguardian.com/commentisfree/2009/sep/13/economics-economic-growth-and-recession-global-economy

I also strongly recommend Stiglitz's book:

http://www.goodreads.com/book/show/16685439-the-price-of-inequality

Jesse -> RGC... , February 21, 2017 at 07:58 AM

Well stated, and that is what it would take to achieve 'party unity.'

In other words, put the people and principles first, and then the health and growth of the party will fall into place.

Party first is power first. And that allure for money and power is what wrecked the Democratic party as it had been-- although that failure was a long time coming.

Peter K. -> Jesse... , February 21, 2017 at 09:51 AM
https://www.jacobinmag.com/2017/02/trump-election-hillary-clinton-racism-democratic-party/

Good interview with Doug Henwood:

The Confusion Candidate

The Democrats' central weakness comes from being a party of business but having to pretend otherwise.

by Katie Halper & Doug Henwood

Since Donald Trump was inaugurated as the president of the United States, things have been moving so quickly it's hard to pause and take stock of our surroundings - let alone evaluate how we arrived at this nightmarish place.

And the liberal commentariat hasn't helped, arguing that the autopsies on Hillary Clinton's failed campaign do nothing but sabotage the "unity" needed to fight Trump. But if we don't want round two against the Right to resemble round one, we need to know what went wrong and how to fix it.

..."

yuan -> RGC... , February 21, 2017 at 12:23 PM
"I don't trust the Democratic party."

Ironically, both Stiglitz and Sanders have declared themselves to be democrats:

I don't trust Sanders or Stiglitz but am somewhat encouraged that both have shown modest support for anti-capitalist reforms.

RGC -> yuan... , February 21, 2017 at 12:51 PM
'Ironically, both Stiglitz and Sanders have declared themselves to be democrats"

I was a Democrat before and would be again. But, that would require that the neocons and neoliberals would be replaced by progressives.

RGC -> RGC... , February 21, 2017 at 01:08 PM
Shumer was elected Senate minority leader and that is a bad sign to me. He is sponsored by both neocons and neoliberals.

I want to see if Ellison is elected chair of the DNC.

Peter K. -> yuan... , February 21, 2017 at 01:36 PM
"I don't trust Sanders or Stiglitz but am somewhat encouraged that both have shown modest support for anti-capitalist reforms."

You're a lunatic troll. No wonder PGL likes you.

Peter K. -> RGC... , February 21, 2017 at 08:16 AM
why didn't "Joe" back Bernie Sanders?

Inquiring minds want to know.

RGC -> Peter K.... , February 21, 2017 at 09:14 AM
Joe wants to be allowed to speak his piece. If he irritates the plutocrats too much they will cut off his access to media.

He is a bit too timid for my taste.

[Feb 25, 2017] Attempt to cover the nature of American neoliberal imperialism ?

Feb 25, 2017 | economistsview.typepad.com
anne : February 21, 2017 at 07:11 AM , 2017 at 07:11 AM
http://www.bradford-delong.com/2017/02/twenty-first-century-american-nationalism-needs-to-be-profoundly-cosmopoiltan.html

February 20, 2017

Twenty-First Century American Nationalism Needs to Be Profoundly Cosmopolitan

The right pose--substantive and rhetorical--is to recognize that, just as since 1620 the good American nationalism has always held that people anywhere can elect to become Americans by joining our utopian project here at home, so in the twentieth and twenty-first centuries that good American nationalism is one that puts global prosperity and being a good neighbor and benevolent hegemon first....

-- Brad DeLong

libezkova -> anne... , February 21, 2017 at 08:00 AM
Attempt to cover the nature of American neoliberal imperialism ?
Peter K. -> anne... , February 21, 2017 at 08:12 AM
Howbout the IMF's treatment of Greece. Is that being a "good neighbor."

What about Iraq? Was destabilizing the Middle East and sending a flood of refugees into Europe being a benevolent hegemon?

I guess for DeLong being a good hegemon means buying the exports of our allies like Japan and Germany and allowing them and China to run trade surpluses, even if it benefits multinational corporations at the expense of the American middle class.

And turns us into an oligarchy. How does that make the globe safer?

By provoking a populist backlash which results in Brexit and President Trump. How does that make the world safer?

[Feb 25, 2017] Pro-lifers disavow clinic bombings: "We finally see the irony

Feb 25, 2017 | economistsview.typepad.com
Tom aka Rusty : , February 21, 2017 at 11:11 AM
Not as good as The Onion, but pretty funny in a weird way:

http://www.hillarybeattrump.org

RGC -> Tom aka Rusty... , February 21, 2017 at 11:38 AM
Pro-lifers disavow clinic bombings: "We finally see the irony"

(My keyboard is devastated)

ilsm -> Tom aka Rusty... , February 21, 2017 at 02:08 PM
democrats' 'real America' where the deep state McCarthy's the republicans and the media lies keeping the Cambridge and Berkley 'majority' conned.

[Feb 21, 2017] Our situation with neoliberalism reminds me lines from the Hotel California

Feb 21, 2017 | economistsview.typepad.com
libezkova -> libezkova... February 20, 2017 at 08:36 PM , 2017 at 08:36 PM
Our situation with neoliberalism reminds me lines from the "Hotel California " ;-)

http://www.azlyrics.com/lyrics/eagles/hotelcalifornia.html
== quote ==
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
"Relax, " said the night man,
"We are programmed to receive.
You can check-out any time you like,
But you can never leave! "

[Feb 21, 2017] Will neoliberalism outlast Bolshevism which lasted 74 years

Feb 21, 2017 | economistsview.typepad.com

im1dc -> libezkova... , February 20, 2017 at 07:16 PM
We can agree that all politico-economic systems tried thus far by man have fatal flaws. Ours just works better, or has, for longer than any other, so far that is.
libezkova -> im1dc... , February 20, 2017 at 07:18 PM
Very true.
libezkova -> libezkova... , February 20, 2017 at 08:36 PM
Out situation with neoliberalism reminds me lines from "Hotel California ;-)

http://www.azlyrics.com/lyrics/eagles/hotelcalifornia.html
== quote ==
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
"Relax, " said the night man,
"We are programmed to receive.
You can check-out any time you like,
But you can never leave! "

cm -> im1dc... , February 20, 2017 at 08:56 PM
It has worked for longer than its contemporary contenders. E.g. the Roman empire could point to more centuries of existence. When would you say "this system" started? E.g. is the current US a smooth continuation of the late 1700's version, or were there "reboots" in between? How about a continuation of British capitalism (also 1700s or earlier)?
libezkova -> cm... , February 21, 2017 at 07:23 AM
I think his point was that the USA (1776 - current)=="USA capitalism" which is around 200 years old outlasted Bolshevism which lasted for only 74 years.

Of course, British capitalism is as long existing as the US capitalism (probably slightly longer, as we can view period of slave ownership as "imperfect" or mixed capitalism).

In other words capitalism in its various forms is a relatively long term social system. Which experienced several, often dramatic, transformations along the way. Probably all post Napoleonic years can be viewed as years of existence of capitalism. So the USA is as old as capitalism itself.

Of course various forms of capitalism are short lived:

In this sense Bolshevism (which Chinese viewed as a form of imperialism ;-) which lasted 74 years or so outlasted them.

[Feb 21, 2017] Globalisation and Economic Nationalism naked capitalism

Notable quotes:
"... Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its 'losers', and is bound to harm growth especially in emerging economies. The world rather needs a more inclusive model of globalisation. ..."
"... From an energy point of view globalisation is a disaster. The insane level of fossil fuels that this current world requires for transportation of necessities (food and clothing) is making this world an unstable world. Ipso Facto. ..."
"... Those who believe that globalisation is bringing value to the world should reconsider their views. The current globalisation has created both monopolies on a geopolitical ground, ie TV make or shipbuilding in Asia. ..."
"... Do you seriously believe that these new geographical and corporate monopolies does not create the kind bad outcomes that traditional – country-centric ones – monopolies have in the past? ..."
"... Then there is the practical issue of workers having next to no bargaining power under globalization. Do people really suppose that Mexican workers would be willing to strike so that their US counterparts, already making ficew times as much money, would get a raise? ..."
"... Basically our elite sold us a bill of goods is why we lost manufacturing. Greed. Nothing else. ..."
"... So proof is required to rollback globalization, but no proof was required to launch it or continue dishing it out? It's good to be the King, eh? ..."
"... America hasn't just gotten rid of the low level jobs. It has also gotten rid of supervisors and factory managers. Those are skills you can't get back overnight. For US plants in Mexico, you might have US managers there or be able to get special visas to let those managers come to the US. But US companies have shifted a ton, and I meant a ton, to foreign subcontractors. Some would put operations in the US to preserve access to US customers, but their managers won't speak English. How do you make this work? ..."
"... The real issue is commitment. Very little manufacturing will be re-shored unless companies are convinced that it is in their longterm interest to do so. ..."
"... There is also what I've heard referred to as the "next bench" phenomenon, in which products arise because someone designs a new product/process to solve a manufacturing problem. Unless one has great foresight, the designer of the new product must be aware there is a problem to solve. ..."
"... When a country is involved in manufacturing, the citizens employed will have exposure to production problems and issues. ..."
"... After his speech he took questions. I asked "Would Toyota ever separate design from manufacturing?" as HP had done, shipping all manufacturing to Asia. "No" was his answer. ..."
"... In my experience, it is way too useful to have the line be able to easily call the designer in question and have him come take a look at what his design is doing. HP tried to get around that by sending part of the design team to Asia to watch the startup. Didn't work as well. And when problems emerged later, it was always difficult to debug by remote control. ..."
"... How about mass imports of cheap workers into western countries in the guise of emigrants to push down worker's pay and gut things like unions. That factor played a decisive factor in both the Brexit referendum and the US 2016 elections. Or the subsidized exportation of western countries industrial equipment to third world countries, leaving local workers swinging in the wind. ..."
"... The data sets do not capture some of the most important factors in what they are saying. It is like putting together a paper on how and why white men voted in the 2016 US elections as they did – and forgetting to mention the effect of the rest of the voters involved. ..."
"... I had a similar reaction. This research was reinforcing info about everyone's resentment over really bad distribution of wealth, as far as it went, but it was so unsatisfying ..."
"... "Right to work" is nothing other than a way to undercut quality of work for "run-to-the-bottom competitive pay." ..."
"... I've noticed that the only people in favor of globalization are those whose jobs are not under threat from it. ..."
"... First off, economic nationalism is not necessarily right wing. I would certainly classify Bernie Sanders as an economic nationalist (against open borders and against "free" trade). Syriza and Podemos could arguably be called rather ineffective economic nationalist parties. I would say the whole ideology of social democracy is based on the Swedish nationalist concept of a "folkhem", where the nation is the home and the citizens are the folk. ..."
"... So China is Turmpism on steroids. Israel obviously is as well. Why do some nations get to be blatantly Trumpist while for others these policies are strictly forbidden? ..."
"... One way to look at Globalization is as an updated version of the post WW1 Versailles Treaty which imposed reparations on a defeated Germany for all the harm they caused during the Great War. The Globalized Versailles Treaty is aimed at the American and European working classes for the crimes of colonialism, racism, slavery and any other bad things the 1st world has done to the 3rd in the past. ..."
"... And yes, this applies to Bernie Sanders as well. During that iconic interview where Sanders denounced open borders and pushed economic nationalism, the Neoliberal interviewer immediately played the global guilt card in response. ..."
"... During colonialism the 3rd world had a form of open borders imposed on it by the colonial powers, where the 3rd world lost control of who what crossed their borders while the 1st world themselves maintained a closed border mercantilist regime of strict filters. So the anti-colonialist movement was a form of Trumpist economic nationalism where the evil foreigners were given the boot and the nascent nations applied filters to their borders. ..."
"... Nationalism (my opinion) can do this – economic nationalism. And of course other people think oh gawd, not that again – it's so inefficient for my investments- I can't get fast returns that way but that's just the point. ..."
"... China was not a significant exporter until the 2001 inclusion in WTO: it cannot possibly have caused populist uprisings in Italy and Belgium in the 1990s. It was probably too early even for Pim Fortuyn in the Netherlands, who was killed in 2002, Le Pen's electoral success in the same year, Austria's FPOE in 1999, and so on. ..."
"... In the 1930s Keynes realized, income was just as important as profit as this produced a sustainable system that does not rely on debt to maintain demand. ..."
"... "Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system." ..."
"... The Romans are the basis. Patricians, Equites and Plebs. Most of us here are clearly plebeian. Time to go place some bets, watch the chariot races and gladiatorial fights, and get my bread subsidy. Ciao. ..."
"... 80-90% of Bonds and Equities ( at least in USA) are owned by top 10 %. 0.7% own 45% of global wealth. 8 billionaires own more than 50% of wealth than that of bottom 50% in our Country! ..."
"... Globalisation has caused a surge in support for nationalist and radical right political platforms. ..."
"... Trump's withdrawal from the Trans-Pacific Partnership seems to be a move in that direction. ..."
"... Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its 'losers' ..."
"... and is bound to harm growth especially in emerging economies. ..."
"... The world rather needs a more inclusive model of globalisation. ..."
Feb 21, 2017 | www.nakedcapitalism.com
DanielDeParis , February 20, 2017 at 1:09 am

Definitely a pleasant read but IMHO wrong conclusion: Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its 'losers', and is bound to harm growth especially in emerging economies. The world rather needs a more inclusive model of globalisation.

From an energy point of view globalisation is a disaster. The insane level of fossil fuels that this current world requires for transportation of necessities (food and clothing) is making this world an unstable world. Ipso Facto.

We need a world where goods move little as possible (yep!) when smart ideas and technology (medical, science, industry, yep that's essential) move as much as possible. Internet makes this possible. This is no dream but a XXIth century reality.

Work – the big one – is required and done where and when it occurs. That is on all continents if not in every country. Not in an insanely remote suburbs of Asia.

Those who believe that globalisation is bringing value to the world should reconsider their views. The current globalisation has created both monopolies on a geopolitical ground, ie TV make or shipbuilding in Asia.

Do you seriously believe that these new geographical and corporate monopolies does not create the kind bad outcomes that traditional – country-centric ones – monopolies have in the past?

Yves Smith can have nasty words when it comes to discussing massive trade surplus and policies that supports them. That's my single most important motivation for reading this challenging blog, by the way.

Thanks for the blog:)

tony , February 20, 2017 at 5:09 am

Another thing is that reliance on complex supply chains is risky. The book 1177 B.C.: The Year Civilization Collapsed describes how the ancient Mediterranian civilization collapsed when the supply chains stopped working.

Then there is the practical issue of workers having next to no bargaining power under globalization. Do people really suppose that Mexican workers would be willing to strike so that their US counterparts, already making ficew times as much money, would get a raise?

Is Finland somehow supposed to force the US and China to adopt similar worker rights and environmental protections? No, globalization, no matter how you slice it,is a race to the bottom.

digi_owl , February 20, 2017 at 10:12 am

Sadly protectionism gets conflated with empire building, because protectionism was at its height right before WW1.

Altandmain , February 20, 2017 at 1:35 am

I do not agree with the article's conclusion either.

Reshoring would have 1 of 2 outcomes:

Basically our elite sold us a bill of goods is why we lost manufacturing. Greed. Nothing else.

Ruben , February 20, 2017 at 3:07 am

The conclusion is the least important thing. Conclusions are just interpretations, afterthoughts, divagations (which btw are often just sneaky ways to get your work published by TPTB, surreptitiously inserting radical stuff under the noses of the guardians of orthodoxy).

The value of these reports is in providing hardcore statistical evidence and quantification for something for which so many people have a gut feeling but just cann't prove it (although many seem to think that just having a strong opinion is sufficient).

Yves Smith Post author , February 20, 2017 at 3:27 am

Yes, correct. Intuition is great for coming up with hypotheses, but it is important to test them. And while a correlation isn't causation, it at least says the hypothesis isn't nuts on its face.

In addition, studies like this are helpful in challenging the oft-made claim, particularly in the US, that people who vote for nationalist policies are bigots of some stripe.

KnotRP , February 20, 2017 at 10:02 am

So proof is required to rollback globalization, but no proof was required to launch it or continue dishing it out? It's good to be the King, eh?

WheresOurTeddy , February 20, 2017 at 1:05 pm

KnotRP, as far as the Oligarchy is concerned, they don't need proof for anything #RememberTheHackedElectionOf2016

/s

Yves Smith Post author , February 20, 2017 at 6:48 am

You are missing the transition costs, which will take ten years, maybe a generation.

America hasn't just gotten rid of the low level jobs. It has also gotten rid of supervisors and factory managers. Those are skills you can't get back overnight. For US plants in Mexico, you might have US managers there or be able to get special visas to let those managers come to the US. But US companies have shifted a ton, and I meant a ton, to foreign subcontractors. Some would put operations in the US to preserve access to US customers, but their managers won't speak English. How do you make this work?

The only culture with demonstrated success in working with supposedly hopeless US workers is the Japanese, who proved that with the NUMMI joint venture with GM in one of its very worst factories (in terms of the alleged caliber of the workforce, as in many would show up for work drunk). Toyota got the plant to function at better than average (as in lower) defect levels and comparable productivity to its plants in Japan, which was light years better than Big Three norms.

I'm not sure any other foreign managers are as sensitive to detail and the fine points of working conditions as the Japanese (having worked with them extensively, the Japanese hear frequencies of power dynamics that are lost on Westerners. And the Chinese do not even begin to have that capability, as much as they have other valuable cultural attributes).

Katharine , February 20, 2017 at 10:24 am

That is really interesting about the Japanese sensitivity to detail and power dynamics. If anyone has managed to describe this in any detail, I would love to read more, though I suppose if their ability is alien to most Westerners the task of describing it might also be too much to handle.

Left in Wisconsin , February 20, 2017 at 10:39 am

I lean more to ten years than a generation. And in the grand scheme of things, 10 years is nothing.

The real issue is commitment. Very little manufacturing will be re-shored unless companies are convinced that it is in their longterm interest to do so. Which means having a sense that the US government is serious, and will continue to be serious, about penalizing off-shoring.

Regardless of Trump's bluster, which has so far only resulted in a handful of companies halting future offshoring decisions (all to the good), we are nowhere close to that yet.

John Wright , February 20, 2017 at 10:52 am

There is also what I've heard referred to as the "next bench" phenomenon, in which products arise because someone designs a new product/process to solve a manufacturing problem. Unless one has great foresight, the designer of the new product must be aware there is a problem to solve.

When a country is involved in manufacturing, the citizens employed will have exposure to production problems and issues.

Sometimes the solution to these problems can lead to new products outside of one's main business, for example the USA's Kingsford Charcoal arose from a scrap wood disposal problem that Henry Ford had.

https://www.kingsford.com/country/about-us/

If one googles for "patent applications by countries" one gets these numbers, which could be an indirect indication of some of the manufacturing shift from the USA to Asia.

Patent applications for the top 10 offices, 2014

1. China 928,177
2. US 578,802
3. Japan 325,989
4. South Korea 210,292

What is not captured in these numbers are manufacturing processes known as "trade secrets" that are not disclosed in a patent. The idea that the USA can move move much of its manufacturing overseas without long term harming its workforce and economy seems implausible to me.

marku52 , February 20, 2017 at 2:55 pm

While a design EE at HP, they brought in an author who had written about Toyota's lean design method, which was currently the management hot button du jour. After his speech he took questions. I asked "Would Toyota ever separate design from manufacturing?" as HP had done, shipping all manufacturing to Asia. "No" was his answer.

In my experience, it is way too useful to have the line be able to easily call the designer in question and have him come take a look at what his design is doing. HP tried to get around that by sending part of the design team to Asia to watch the startup. Didn't work as well. And when problems emerged later, it was always difficult to debug by remote control.

And BTW, after manufacturing went overseas, management told us for costing to assume "Labor is free". Some level playing field.

The Rev Kev , February 20, 2017 at 2:00 am

Oh gawd! The man talks about the effects of globalization and says that the solution is a "a more inclusive model of globalization"? Seriously? Furthermore he singles out Chinese imports as the cause of people being pushed to the right. Yeah, right.

How about mass imports of cheap workers into western countries in the guise of emigrants to push down worker's pay and gut things like unions. That factor played a decisive factor in both the Brexit referendum and the US 2016 elections. Or the subsidized exportation of western countries industrial equipment to third world countries, leaving local workers swinging in the wind.

This study is so incomplete it is almost useless. The only thing that comes to mind to say about this study is the phrase "Apart from that Mrs. Lincoln, how was the play?" And what form of appropriate compensation of its 'losers' would they suggest? Training for non-existent jobs? Free moving fees to the east or west coast for Americans in flyover country? Subsidized emigration fees to third world countries where life is cheaper for workers with no future where they are?

Nice try fellas but time to redo your work again until it is fit for a passing grade.

Ruben , February 20, 2017 at 3:00 am

How crazy of them to have used generalized linear mixed models with actual data carefully compiled and curated when they could just asked you right?

The Rev Kev , February 20, 2017 at 4:19 am

Aw jeez, mate – you've just hurt my feelings here. Take a look at the actual article again. The data sets do not capture some of the most important factors in what they are saying. It is like putting together a paper on how and why white men voted in the 2016 US elections as they did – and forgetting to mention the effect of the rest of the voters involved.

Hey, here is an interesting thought experiment for you. How about we apply the scientific method to the past 40 years of economic theory since models with actual data strike your fancy. If we find that the empirical data does not support a theory such as the theory of economic neoliberalism, we can junk it then and replace it with something that actually works then. So far as I know, modern economics seems to be immune to scientific rigour in their methods unlike the real sciences.

Ruben , February 20, 2017 at 4:38 am

I feel your pain Rev.

Not all relevant factors need to be included for a statistical analysis to be valid, as long as relevant ignored factors are randomized amongst the sampling units, but you know that of course.

Thanks for you kind words about the real sciences, we work hard to keep it real, but once again, in all fairness, between you and me mate, is not all rigour, it is a lot more Feyerabend than Popper.

The Rev Kev , February 20, 2017 at 5:41 am

What you say is entirely true. The trouble has always been to make sure that that statistical analysis actually reflects the real world enough to make it valid. An example of where it all falls apart can be seen in the political world when the pundits, media and all the pollsters assured America that Clinton had it in the bag. It was only after the dust had settled that it was revealed how bodgy the methodology used had been.

By the way, Karl Popper and Paul Feyerabend sound very interesting so thanks for the heads up. Have you heard of some of the material of another bloke called Mark Blyth at all? He has some interesting observations to make on modern economic practices.

susan the other , February 20, 2017 at 12:03 pm

I had a similar reaction. This research was reinforcing info about everyone's resentment over really bad distribution of wealth, as far as it went, but it was so unsatisfying and I immediately thought of Blyth who laments the whole phylogeny of economics as more or less serving the rich.

The one solution he offered up a while ago was (paraphrasing) 'don't sweat the deficit spending because it is all 6s in the end' which is true if distribution doesn't stagnate. So as it stands now, offshoring arms, legs and firstborns is like 'nothing to see here, please move on'. The suggestion that we need a more inclusive form of global trade kind of begs the question. Made me uneasy too.

Ruben , February 20, 2017 at 10:58 pm

Please don't pool pundits and media with the authors of objective works like the one we are commenting :-)

You are welcome, you might also be interested in Lakatos, these 3 are some of the most interesting philosophers of science of the 20th century, IMO.

Blyth has been in some posts here at NC recently.

relstprof , February 20, 2017 at 4:30 am

"Gut things like unions." How so? In my recent interaction with my apartment agency's preferred contractors, random contractors not unionized, I experienced a 6 month-long disaster.

These construction workers bragged that in 2 weeks they would have the complete job done - a reconstructed deck and sunroom. Verbatim quote: "Union workers complete the job and tear it down to keep everyone paying." Ha Ha! What a laugh!

Only to have these same dudes keep saying "next week", "next week", "next week", "next week". The work began in August and only was finished (not completely!) in late January. Sloppy crap! Even the apartment agency head maintenance guy who I finally bitched at said "I guess good work is hard to come by these days."

Of the non-union guys he hired.

My state just elected a republican governor who promised "right to work." This was just signed into law.

Immigrants and Mexicans had nothing to do with it. They're not an impact in my city. "Right to work" is nothing other than a way to undercut quality of work for "run-to-the-bottom competitive pay."

Now I await whether my rent goes up to pay for this nonsense.

bob , February 20, 2017 at 11:24 pm

They look at the labor cost, assume someone can do it cheaper. They don't think it's that difficult. Maybe it's not. The hard part of any and all construction work is getting it finished. Getting started is easy. Getting it finished on time? Nah, you can't afford that.

Karl Kolchak , February 20, 2017 at 10:22 am

I've noticed that the only people in favor of globalization are those whose jobs are not under threat from it. Beyond that, I think the flood of cheap Chinese goods is actually helping suppress populist anger by allowing workers whose wages are dropping in real value terms to maintain the illusion of prosperity. To me, a more "inclusive" form of globalization would include replacing every economist with a Chinese immigrant earning minimum wage. That way they'd get to "experience" how awesome it is and the value of future economic analysis would be just as good.

The Trumpening , February 20, 2017 at 2:27 am

I'm going to question a few of the author's assumptions.

First off, economic nationalism is not necessarily right wing. I would certainly classify Bernie Sanders as an economic nationalist (against open borders and against "free" trade). Syriza and Podemos could arguably be called rather ineffective economic nationalist parties. I would say the whole ideology of social democracy is based on the Swedish nationalist concept of a "folkhem", where the nation is the home and the citizens are the folk.

Secondly, when discussing the concept of economic nationalism and the nation of China, it would be interesting to discuss how these two things go together. China has more billionaires than refugees accepted in the past 20 years. Also it is practically impossible for a non Han Chinese person to become a naturalized Chinese citizen. And when China buys Boeing aircraft, they wisely insist on the production being done in China. A close look at Japan would yield similar results.

So China is Turmpism on steroids. Israel obviously is as well. Why do some nations get to be blatantly Trumpist while for others these policies are strictly forbidden?

One way to look at Globalization is as an updated version of the post WW1 Versailles Treaty which imposed reparations on a defeated Germany for all the harm they caused during the Great War. The Globalized Versailles Treaty is aimed at the American and European working classes for the crimes of colonialism, racism, slavery and any other bad things the 1st world has done to the 3rd in the past.

Of course during colonialism the costs were socialized within colonizing states and so it was the people of the colonial power who paid those costs that weren't borne by the colonial subjects themselves, who of course paid dearly, and it was the oligarchic class that privatized the colonial profits. But the 1st world oligarchs and their urban bourgeoisie are in strong agreement that the deplorable working classes are to blame for systems that hurt working classes but powerfully enriched the wealthy!

And so with the recent rebellions against Globalization, the 1st and 3rd world oligarchs are convinced these are nothing more than the 1st world working classes attempting to shirk their historic guilt debt by refusing to pay the rightful reparations in terms of standard of living that workers deserve to pay for the crimes committed in the past by their wealthy co-nationals.

And yes, this applies to Bernie Sanders as well. During that iconic interview where Sanders denounced open borders and pushed economic nationalism, the Neoliberal interviewer immediately played the global guilt card in response.

Ruben , February 20, 2017 at 3:23 am

Interesting. Another way to look at it is from the point of view of entropy and closed vs open systems. Before globalisation the 1st world working classes enjoyed a high standard of living which was possible because their system was relatively closed to the rest of the world. It was a high entropy, strongly structured socio-economic arrangement, with a large difference in standard of living between 1st world and 3rd world working classes. Once their system became more open by virtue (or vice) of globalisation, entropy increased as commanded by the 2nd Law of Thermodynamics so the 1st world and 3rd world working classes became more equalised. The socio-economic arrangements became less structured. This means for the Trumpening kind of politicians it is a steep uphill battle, to increase entropy again.

The Trumpening , February 20, 2017 at 3:56 am

Yes, I agree, but if we step back in history a bit we can see the colonial period as a sort of reverse globalization which perhaps portends a bit of optimism for the Trumpening.

I use the term open and closed borders but these are not precise. What I am really saying is that open borders does not allow a country to filter out negative flows across their border. Closed borders does allow a nation to impose a filter. So currently the US has more open borders (filters are frowned upon) and China has closed borders (they can filter out what they don't want) despite the fact that obviously China has plenty of things crossing its border.

During colonialism the 3rd world had a form of open borders imposed on it by the colonial powers, where the 3rd world lost control of who what crossed their borders while the 1st world themselves maintained a closed border mercantilist regime of strict filters. So the anti-colonialist movement was a form of Trumpist economic nationalism where the evil foreigners were given the boot and the nascent nations applied filters to their borders.

So the 3rd world to some extent (certainly in China at least) was able to overcome entropy and regain control of their borders. You are correct in that it will be an uphill struggle for the 1st world to repeat this trick. In the ideal world both forms of globalization (colonialism and the current form) would be sidelined and all nations would be allowed to use the border filters they think would best protect the prosperity of their citizens.

Another good option would be a version of the current globalization but where the losers are the wealthy oligarchs themselves and the winners are the working classes. It's hard to imagine it's easy if you try!

What's interesting about the concept of entropy is that it stands in contradiction to the concept of perpetual progress. I'm sure there is some sort of thesis, antithesis, synthesis solution to these conflicting concepts.

Ruben , February 20, 2017 at 6:07 am

To overcome an entropy current requires superb skill commanding a large magnitude of work applied densely on a small substratum (think of the evolution of the DNA, the internal combustion engine). I believe the Trumpening laudable effort and persuasion would have a chance of success in a country the size of The Netherlands, or even France, but the USA, the largest State machinery in the world, hardly. When the entropy current flooded the Soviet system the solution came firstly in the form of shrinkage.

We need to think more about it, a lot more, in order to succeed in this 1st world uphill struggle to repeat the trick. I am pretty sure that as Pierre de Fermat famously claimed about his alleged proof, the solution "is too large to fit in the margins of this book".

susan the other , February 20, 2017 at 12:36 pm

My little entropy epiphany goes like this: it's like boxes – containers, if you will, of energy or money, or trade goods, the flow of which is best slowed down so everybody can grab some. Break it all down, decentralize it and force it into containers which slow the pace and share the wealth.

Nationalism (my opinion) can do this – economic nationalism. And of course other people think oh gawd, not that again – it's so inefficient for my investments- I can't get fast returns that way but that's just the point.

Ruben , February 20, 2017 at 10:51 pm

I like your epiphany susan.

John Wright , February 20, 2017 at 1:25 pm

Don't you mean "It was a LOWER entropy (as in "more ordered"), strongly structured socio-economic arrangement, with a large difference in standard of living between 1st world"?

The entropy increased as a consequence of human guided globalization.

Of course, from a thermodynamic standpoint, the earth is not a closed system as it is continually flooded with new energy in the form of solar radiation.

Ruben , February 20, 2017 at 10:49 pm

Yes, thank you, I made that mistake twice in the post you replying to.

Hemang , February 20, 2017 at 4:54 am

The Globalized Versailles Treaty ! Permit me a short laughter . The terms of the crippling treaty were dictated by the victors largely on insecurities of France.

The crimes of the 1st against the 3rd go on even now- the only difference is that some of the South like China and India are major nuclear powers now.

The racist crimes in the US are even more flagrant- the Blacks whose labour as slaves allowed for cotton revolution enabling US capitalists to ride the industrial horse are yet to be rehabilitated , Obama or no Obama. It is a matter of profound shame.

The benefits of Globalization have gone only to the cartel of 1st and 3rd World Capitalists. And they are very happy as the lower classes keep fighting. Very happy indeed.

DorDeDuca , February 20, 2017 at 1:22 pm

That is solely class (crass) warfare. You can not project the inequalities of the past to the unsuspecting paying customers of today.

Hemang , February 20, 2017 at 1:35 pm

The gorgon cry of the past is all over the present , including in " unsuspecting" paying folks of today! Blacks being brought to US as slave agricultural labour was Globalisation. Their energy vibrated the machinery of Economics subsequently. What Nationalism and where is it hiding pray? Bogus analysis here , yes.

dontknowitall , February 20, 2017 at 5:40 am

The reigning social democratic parties in Europe today are not the Swedish traditional parties of yesteryear they have morphed into neoliberal austerians committed to globalization and export driven economic models at any cost (CETA vote recently) and most responsible for the economic collapse in the EU

https://www.washingtonpost.com/news/wonk/wp/2017/02/15/austerity-was-a-bigger-disaster-than-we-thought/?utm_term=.e4b799b14d81

disc_writes , February 20, 2017 at 4:22 am

I wonder they chose Chinese imports as the cause of the right-wing shift, when they themselves admit that the shift started in the 1990s. At that time, there were few Chinese imports and China was not even part of the WHO.

If they are thinking of movements like the Lega Nord and Vlaams Blok, the reasons are clearly not to be found in imports, but in immigration, the welfare state and lack of national homogeneity, perceived or not.

And the beginnings of the precariat.

So it is not really the globalization of commerce that did it, but the loss of relevance of national and local identities.

Ruben , February 20, 2017 at 4:41 am

One cause does not exclude the other, they may have worked synergistically.

disc_writes , February 20, 2017 at 5:34 am

Correlation does not imply causation, but lack of correlation definitely excludes it.

The Lega was formed in the 1980s, Vlaams Blok at the end of the '70s. They both had their best days in the 1990s. Chinese imports at the time were insignificant.

I cannot find the breakdown of Chinese imports per EU country, but here are the total Chinese exports since 1983:

http://www.tradingeconomics.com/china/exports

China was not a significant exporter until the 2001 inclusion in WTO: it cannot possibly have caused populist uprisings in Italy and Belgium in the 1990s. It was probably too early even for Pim Fortuyn in the Netherlands, who was killed in 2002, Le Pen's electoral success in the same year, Austria's FPOE in 1999, and so on.

The timescales just do not match. Whatever was causing "populism", it was not Chinese imports, and I can think of half a dozen other, more likely causes.

Furthermore, the 1980s and 1990s were something of an industrial renaissance for Lombardy and Flanders: hardly the time to worry about Chinese imports.

And if you look at the map. the country least affected by the import shock (France) is the one with the strongest populist movement (Le Pen).

People try to conflate Trumpism and Brexit with each other, then try to conflate this "anglo-saxon" populism with previous populisms in Europe, and try to deduce something from the whole exercise.

That "something" is just not there and the exercise is pointless. IMHO at least.

The Trumpening , February 20, 2017 at 5:05 am

European regionalism is often the result of the rise of the EU as a new, alternative national government in the eyes of the disgruntled regions. Typically there are three levels of government, local, regional (states) and national. With the rise of the EU we have a fourth level, supra-national. But to the Flemish, Scottish, Catalans, etc, they see the EU as a potential replacement for the National-level governments they currently are unhappy being under the authority of.

Sound of the Suburbs , February 20, 2017 at 4:28 am

Why isn't it working? – Part 1

Capitalism should be evolving but it went backwards. Keynesian capitalism evolved from the free market capitalism that preceded it. The absolute faith in markets had been laid low by 1929 and the Great Depression.

After the Keynesian era we went back to the old free market capitalism of neoclassical economics. Instead of evolving, capitalism went backwards. We had another Wall Street Crash that has laid low the once vibrant global economy and we have entered into the new normal of secular stagnation. In the 1930s, Irving Fisher studied the debt deflation caused by debt saturated economies. Today only a few economists outside the mainstream realise this is the problem today.

In the 1930s, Keynes realized only fiscal stimulus would pull the US out of the Great Depression, eventually the US implemented the New Deal and it started to recover. Today we use monetary policy that keeps asset prices up but cannot overcome the drag of all that debt in the system and its associated repayments.

In the 1920s, they relied on debt based consumption, not realizing how consumers will eventually become saturated with debt and demand will fail. Today we rely on debt based consumption again, Greece consumed on debt. until it maxed out on debt and collapsed.

In the 1930s Keynes realized, income was just as important as profit as this produced a sustainable system that does not rely on debt to maintain demand. Keynes was involved with the Bretton-Woods agreement after the Second World War and recycled the US surplus to Europe to restore trade when Europe lay in ruins. Europe could rebuild itself and consume US products, everyone benefitted.

Today there are no direct fiscal transfers within the Euro-zone and it is polarizing. No one can see the benefits of rebuilding Greece, to allow it to carry on consuming the goods from surplus nations and it just sinks further and further into the mire. There is a lot to be said for capitalism going forwards rather than backwards and making the same old mistakes a second time.

Sound of the Suburbs , February 20, 2017 at 5:25 am

Someone who has worked in the Central Bank of New York and who Ben Bernanke listened to, ensuring the US didn't implement austerity, Richard Koo:

https://www.youtube.com/watch?v=8YTyJzmiHGk

The ECB didn't listen and killed Greece with austerity and is laying low the Club-Med nations. Someone who knows what they are doing, after studying the Great Depression and Japan after 1989. Let's keep him out of the limelight; he has no place on the ship of fools running the show.

sunny129 , February 20, 2017 at 6:42 pm

DEBT on Debt with QEs+ ZRP ( borrowing from future) was the 'solution' by Bernanke to mask the 2008 crisis and NOT address the underlying structural reforms in the Banking and the Financial industry. He was part of the problem for housing problem and occurred under his watch! He just kicked the can with explosive credit growth ( but no corresponding growth in the productive Economy!)and easy money!

We have a 'Mother of all bubbles' at our door step. Just matter of time when it will BLOW and NOT if! There is record levels of DEBT ( both sovereign, public and private) in the history of mankind, all over the World.

DEBT has been used as a panacea for all the financial problems by CBers including Bernanke! Fed's balance sheet was than less 1 Trillion in 2008 ( for all the years of existence of our Country!) but now over 3.5 Trillions and climbing!

Kicking the can down the road is like passing the buck to some one (future generations!). And you call that solution by Mr. Bernanke? Wow!

Will they say again " No one saw this coming'? when next one descends?

Sound of the Suburbs , February 20, 2017 at 4:31 am

Why isn't it working? – Part 2

The independent Central Banks that don't know what they are doing as can be seen from their track record.

The FED presided over the dot.com bust and 2008, unaware that they were happening and of their consequences. Alan Greenspan spots irrational exuberance in the markets in 1996 and passes comment. As the subsequent dot.com boom and housing booms run away with themselves he says nothing.

This is the US money supply during this time:
http://www.whichwayhome.com/skin/frontend/default/wwgcomcatalogarticles/images/articles/whichwayhomes/US-money-supply.jpg

Everything is reflected in the money supply.

The money supply is flat in the recession of the early 1990s.

Then it really starts to take off as the dot.com boom gets going which rapidly morphs into the US housing boom, courtesy of Alan Greenspan's loose monetary policy.

When M3 gets closer to the vertical, the black swan is coming and you have an out of control credit bubble on your hands (money = debt).

We can only presume the FED wasn't looking at the US money supply, what on earth were they doing?

The BoE is aware of how money is created from debt and destroyed by repayments of that debt.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyc
reation.pdf

"Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system."

The BoE's statement was true, but is not true now as banks can securitize bad loans and get them off their books. Before 2008, banks were securitising all the garbage sub-prime mortgages, e.g. NINJA mortgages, and getting them off their books. Money is being created freely and without limit, M3 is going exponential before 2008.

Bad debt is entering the system and no one is taking any responsibility for it. The credit bubble is reflected in the money supply that should be obvious to anyone that cares to look.

Ben Bernanke studied the Great Depression and doesn't appear to have learnt very much.

Irving Fisher studied the Great Depression in the 1930s and comes up with a theory of debt deflation. A debt inflated asset bubble collapses and the debt saturated economy sinks into debt deflation. 2008 is the same as 1929 except a different asset class is involved.

1929 – Margin lending into US stocks
2008 – Mortgage lending into US housing

Hyman Minsky carried on with his work and came up with the "Financial Instability Hypothesis" in 1974.

Steve Keen carried on with their work and spotted 2008 coming in 2005. We can see what Steve Keen saw in 2005 in the US money supply graph above.

The independent Central Banks that don't know what they are doing as can be seen from their track record.

Jesper , February 20, 2017 at 4:51 am

Good to see studies confirming what was already known.

This apparently surprised:

On the contrary, as globalisation threatens the success and survival of entire industrial districts, the affected communities seem to have voted in a homogeneous way, regardless of each voter's personal situation.

It is only surprising for people not part of communities, those who are part of communities see how it affects people around them and solidarity with the so called 'losers' is then shown.

Seems like radical right is the preferred term, it does make it more difficult to sympathize with someone branded as radical right . The difference seems to be between the radical liberals vs the conservative. The radical liberals are too cowardly to propose the laws they want, they prefer to selectively apply the laws as they see fit. Either enforce the laws or change the laws, anything else is plain wrong.

Disturbed Voter , February 20, 2017 at 6:31 am

Socialism for the upper classes, capitalism for the lower classes? That will turn out well. Debt slaves and wage slaves will revolt. That is all the analysis the OP requires. The upper class will respond with suppression, not policy reversal every time. Socialism = making everyone equally poor (obviously not for the upper classes who benefit from the arrangement).

J7915 , February 20, 2017 at 11:15 am

Regrettably today we have socialism for the wealthy, with all the benefits of gov regulations, sympathetic courts and legislatures etc. etc.

Workers are supposed to take care for themselves and the devil take the hind most. How many workers get fired vs the 1%, when there is a failure in the company plan?

Disturbed Voter , February 20, 2017 at 11:59 am

The Romans are the basis. Patricians, Equites and Plebs. Most of us here are clearly plebeian. Time to go place some bets, watch the chariot races and gladiatorial fights, and get my bread subsidy. Ciao.

Sound of the Suburbs , February 20, 2017 at 5:39 am

Globalization created winners and losers throughout the world. The winners liked it, the losers didn't. Democracy is based on the support of the majority.

The majority in the East were winners. The majority in the West were losers.

The Left has maintained its support of neoliberal globalisation in the West. The Right has moved on. There has been a shift to the Right. Democracy is all about winners and losers and whether the majority are winning or losing. It hasn't changed.

sunny129 , February 20, 2017 at 6:54 pm

CAPITAL is mobile and the Labor is NOT!

Globalization( along with communication -internet and transportation) made the Labor wage arbitration, easy in favor of capital ( Multi-Nationals). Most of the jobs gone overseas will NEVER come back. Robotic revolution will render the remaining jobs, less and less!

The 'new' Economy by passed the majority of lower 80-90% and favored the top 10%. The Losers and the Winners!

80-90% of Bonds and Equities ( at least in USA) are owned by top 10 %. 0.7% own 45% of global wealth. 8 billionaires own more than 50% of wealth than that of bottom 50% in our Country!

The Rich became richer!

The tension between Have and Have -Nots has just begun, as Marx predicted!

Sound of the Suburbs , February 20, 2017 at 5:50 am

In the West the rewards of globalisation have been concentrated at the top and rise exponentially within the 1%.

How does this work in a democracy? It doesn't look as though anyone has even thought about it.

David , February 20, 2017 at 6:33 am

I think it's about time that we stopped referring to opposition to globalization as a product or policy of the "extreme right". It would be truer to say that globalization represents a temporary, and now fading, triumph of certain ideas about trade and movement of people and capital which have always existed, but were not dominant in the past. Fifty years ago, most mainstream political parties were "protectionist" in the sense the word is used today. Thirty years ago, protectionism was often seen as a left)wing idea, to preserve standards of living and conditions of employment (Wynne Godley and co). Today, all establishment political parties in the West have swallowed neoliberal dogma, so the voters turn elsewhere, to parties outside the mainstream. Often, it's convenient politically to label them "extreme right", although in Europe some left-wing parties take basically the same position. If you ignore peoples' interests, they won't vote for you. Quelle surprise! as Yves would say.

financial matters , February 20, 2017 at 8:00 am

Yes, there are many reasons to be skeptical of too much globalization such as energy considerations. I think another interesting one is exchange rates.

One of the important concepts of MMT is the importance of having a flexible exchange rate to have full power over your currency. This is fine as far as it goes but tends to put hard currencies against soft currencies where a hard currency can be defined as one that has international authority/acceptance. Having flexible exchange rates also opens up massive amounts of financial speculation relative to fluctuations of these currencies against each other and trying to protect against these fluctuations.

""Keynes' proposal of the bancor was to put a barrier between national currencies, that is to have a currency of account at the global level. Keynes warned that free trade, flexible exchange rates and free movement of capital globally were incompatible with maintaining full employment at the local level""

""Sufficiency provisioning also means that trade would be discouraged rather than encouraged.""

Local currencies can work very well locally to promote employment but can have trouble when they reach out to get resources outside of their currency space especially if they have a soft currency. Global sustainability programs need to take a closer look at how to overcome this sort of social injustice. (Debt or Democracy)

Gman , February 20, 2017 at 6:35 am

As has already been pointed out so eloquently here in the comments section, economic nationalism is not necessarily the preserve of the right, nor is it necessarily the same thing as nationalism.

In the UK the original, most vociferous objectors to EEC membership in the 70s (now the EU) were traditionally the Left, on the basis that it would gradually erode labour rights and devalue the cost of labour in the longer term. Got that completely wrong obviously .

In the same way that global trade has become synonymous with globalisation, the immigration debate has been hijacked and cynically conflated with free movement of (mainly low cost, unskilled) labour and race when they are all VERY different divisive issues.

The other point alluded to in the comments above is the nature of free trade generally. The accepted (neoliberal) wisdom being that 'collateral damage' is unfortunate but inevitable, but it is pretty much an unstoppable or uncontrollable force for the greater global good, and the false dichotomy persists that you either embrace it fully or pull up all the drawbridges with nothing in between.

One of the primary reasons that some competing sectors of some Western economies have done so badly out of globalisation is that they have adhered to 'free market principles' whilst other countries, particularly China, clearly have not with currency controls, domestic barriers to trade, massive state subsidies, wage suppression etc

The China aspect is also fascinating when developed nations look at the uncomfortable 'morality of global wealth distribution' often cited by proponents of globalisation as one of their wider philanthropic goals. Bless 'em. What is clear is that highly populated China and most of its people, from the bottom to the top, has been the primary beneficiaries of this global wealth redistribution, but the rest of the developing world's poor clearly not quite so much.

Eustache de Saint Pierre , February 20, 2017 at 7:11 am

The map on it's own, in terms of the English one time industrial Midlands & North West being shown as an almost black hole, is in itself a kind of " Nuff Said ".

It is also apart from London, where the vast bulk of immigrants have settled.

The upcoming bye-election in Stoke, which could lead to U-Kip taking a once traditionally always strong Labour seat, is right in the middle of that dark cloud.

Anonymous2 , February 20, 2017 at 7:51 am

The problem from the UK 's position, I suggest, is that autarky is not a viable proposition so economic nationalism becomes a two-edged sword. Yes, of course, the UK can place restrictions on imports and immigration but there will inevitably be retaliation and they will enter a game of beggar my neighbour. The current government talks of becoming a beacon for free trade. If we are heading to a more protectionist world, that can only end badly IMHO.

Eustache de Saint Pierre , February 20, 2017 at 11:30 am

Unless we get some meaningful change in thinking on a global scale, I think we are heading somewhere very dark whatever the relative tinkering with an essentially broken system.

The horse is long gone, leaving a huge pile of shit in it's stable.

As for what might happen, I do not know, but I have the impression that we are at the end of a cycle.

sunny129 , February 20, 2017 at 7:04 pm

That 'CYCLE" was dragged on ' unnaturally' with more DEBT on DEBT all over the World by criminal CBers.
Now the end is approaching! Why surprise?

Ignacio , February 20, 2017 at 8:15 am

This is quite interesting, but only part of the story. Interestingly the districts/provinces suffering the most from the chinese import shock are usually densely populated industrial regions of Europe. The electoral systems in Europe (I think all, but I did not check) usually do not weight equally each district, favouring those less populated, more rural (which by the way tend to be very conservative but not so nationalistic). These differences in vote weigthing may have somehow masked the effect seen in this study if radical nationalistic rigth wing votes concentrate in areas with lower weigthed value of votes. For instance, in Spain, the province of Soria is mostly rural and certainly less impacted by chinese imports compared with, for instance, Madrid. But 1 vote in Soria weigths the same as 4 votes in Madrid in number of representatives in the congress. This migth, in part, explain why in Spain, the radical rigth does not have the same power as in Austria or the Netherlands. It intuitively fits the hypothesis of this study.

Nevertheless, similar processes can occur in rural areas. For instance, when Spain entered the EU, french rural areas turned nationalistic against what they thougth could be a wave of agricultural imports from Spain. Ok, agricultural globalization may have less impact in terms of vote numbers in a given country but it still can be politically very influential. In fact spanish entry more that 30 years ago could still be one of the forces behind Le Penism.

craazyman , February 20, 2017 at 8:44 am

I dunno aboout this one.

All this statistical math and yada yada to explain a rise in vote for radical right from 3% in 1985 to 5% now on average? And only a 0.7% marginal boost if your the place really getting hammmered by imports from China? If I'm reading it right, that is, while focusing on Figure 2.

The real "shock" no pun intended, is the vote totals arent a lot higher everywhere.

Then the Post concludes with reference to a "surge in support" - 3% to 5% or so over 30 years is a surge? The line looks like a pretty steady rise over 3 decades.

Maybe I'm missing sommething here.

Also what is this thing they're callling an "Open World" of the past 30 years? And why is that in danger from more balanced trade? It makes no sense. Even back in the 60s and 70s people could go alll over the world for vacations. Or at least most places they coould go. If theh spent their money they'd make friends. Greece even used to be a goood place people went and had fun on a beach.

I think this one is a situation of math runing amuck. Math running like a thousand horses over a hill trampling every blade of grass into mud.

I bet the China factor is just a referent for an entire constellatio of forces that probably don't lend themselves (no pun intended) partiicularly well to social science and principal component analysis - as interesting as that is for those who are interested in that kind of thing (which I am acctually).

Also, I wouldn't call this "free trade". Not that the authors do either, but trade means reciprocity not having your livelihood smashed the like a pinata at Christmas with all your candy eaten by your "fellow countrymen". I wouldn't call that "trade". It's something else.

Ruben , February 20, 2017 at 12:36 pm

Regarding your first point, it is a small effect but it is all due to the China imports impact, you have to add the growth of these parties due to other reasons such as immigration to get the full picture of their growth. Also I think the recent USA election was decided by smaller percentage advantages in three States?

Steve Ruis , February 20, 2017 at 9:00 am

Globalisation is nothing but free trade extended to the entire world. Free trade is a tool used to prevent competition. By flooding countries with our cheaper exports, they do not develop the capacity to compete with us by making their own widgets. So, why are we shocked when those other countries return the favor and when they get the upper hand, we respond in a protectionist way? It looks to me that those countries who are now competing with us in electronics, automobiles, etc. only got to develop those industries in their countries because of protectionism.

Why is this surprising to anyone?

craazyman , February 20, 2017 at 10:41 am

Frank would never have sung this, even drunk! . . . .even in Vegas . .

Trade Be a Lady

They say we'll make a buck
But there is room for doubt
At times you have a very unbalanced way of running out

You say you're good for me
Your pickins have been lush
But before this year is over
I might give you the brush

Seems you've forgot your manners
You don't know how to play
Cause every time I turn around . . . I pay

So trade get your balances right
Trade get your balances right
Trade if you've ever been in balance to begin with
Trade get your balances right

Trade let a citizen see
How fair and humane you can be
I see the way you've treated other guys you've been with
Trade be a lady with me

A lady doesn't dump her exports
It isn't fair, and it's not nice
A lady doesn't wander all over the world
Putting whole communities on ice

Let's keep this economy polite
let's find a way to do it right
Don't stick me baby or I'll wreck the world you win with
Trade be a lady or we'll fight

A lady keeps it fair with strangers
She'd have a heart, she'd be nice
A lady doesn't spread her junk, all over the world
In your face, at any price

Let's keep society polite
Go find a way to do it right
Don't screw me baby cause i know the clowns you sin with
Trade be a lady tonight

Gaylord , February 20, 2017 at 10:56 am

Refugees in great numbers are a symptom of globalization, especially economic refugees but also political and environmental ones. This has strained the social order in many countries that have accepted them in and it's one of the central issues that the so-called "right" is highlighting.

It is no surprise there has been an uproar over immigration policy in the US which is an issue of class as much as foreign policy because of the disenfranchisement of large numbers of workers on both sides of the equation - those who lost their jobs to outsourcing and those who emigrated due to the lack of decent employment opportunities in their own countries.

We're seeing the tip of the iceberg. What will happen when the coming multiple environmental calamities cause mass starvation and dislocation of coastal populations? Walls and military forces can't deter hungry, desperate, and angry people.

The total reliance and gorging on fossil energy by western countries, especially the US, has mandated military aggression to force compliance in many areas of the world. This has brought a backlash of perpetual terrorism. We are living under a dysfunctional system ruled by sociopaths whose extreme greed is leading to world war and environmental collapse.

sunny129 , February 20, 2017 at 7:01 pm

Who created the REFUGEE PROBLEMS in the ME – WEST including USA,UK++

Obama's DRONE program kept BOMBING in SEVEN Countries killing innocents – children and women! All in the name of fighting Terrorism. Billions of arms to sale Saudi Arabia! Wow!

Where were the Democrats and the Resistance and Women's march? Hypocrites!

Anon , February 21, 2017 at 12:12 am

"Our lifestyle is non-negotiable." - Dick Cheney.

Ignacio , February 20, 2017 at 2:40 pm

What happened with Denmark that suddenly dissapeared?

fairleft , February 21, 2017 at 8:08 am

Globalisation has caused a surge in support for nationalist and radical right political platforms.
Just a reminder that nationalism doesn't have to be associated with the radical right. The left is not required to reject it, especially when it can be understood as basically patriotism, expressed as solidarity with all of your fellow citizens.

Trump's withdrawal from the Trans-Pacific Partnership seems to be a move in that direction.
Well, that may be true as far as Trump's motivations are concerned, but a major component (the most important?) of the TPP was strong restraint of trade, a protectionist measure, by intellectual property owners.

Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its 'losers'
Japan has long been 'smart' protectionist, and this has helped prevent the 'loser' problem, in part because Japan, being nationalist, makes it a very high priority to create/maintain a society in which almost all Japanese are more or less middle class. So, it is a fact that protectionism has been and can be associated with more egalitarian societies, in which there are few 'losers' like we see in the West. But the U.S. and most Western countries have a long way to go if they decide to make the effort to be more egalitarian. And, of course, protectionism alone is not enough to make most of the losers into winners again. You'll need smart skills training, better education all around, fewer low-skill immigrants, time, and, most of all strong and long-term commitment to making full employment at good wages national priority number one.

and is bound to harm growth especially in emerging economies.
Growth has been week since the 2008, even though markets are as free as they've ever been. Growth requires a lot more consumers with willingness and cash to spend on expensive, high-value-added goods. So, besides the world finally escaping the effects of the 2008 financial crisis, exporting countries need prosperous consumers either at home or abroad, and greater economic security. And if a little bit of protectionism generates more consumer prosperity and economic stability, exporting countries might benefit overall.

The world rather needs a more inclusive model of globalisation.
Well, yes, the world needs more inclusivity, but globalization doesn't need to be part of the picture. Keep your eyes on the prize: inclusivity/equality, whether latched onto nationally, regionally, 'internationally' or globally, any which way is fine! But prioritization of globalization over those two is likely a victory for more inequality, for more shoveling of our wealth up to the ruling top 1%.

[Feb 21, 2017] Attempt to cover the nature of American neoliberal imperialism ?

Feb 21, 2017 | economistsview.typepad.com
anne : February 21, 2017 at 07:11 AM , 2017 at 07:11 AM
http://www.bradford-delong.com/2017/02/twenty-first-century-american-nationalism-needs-to-be-profoundly-cosmopoiltan.html

February 20, 2017

Twenty-First Century American Nationalism Needs to Be Profoundly Cosmopolitan

The right pose--substantive and rhetorical--is to recognize that, just as since 1620 the good American nationalism has always held that people anywhere can elect to become Americans by joining our utopian project here at home, so in the twentieth and twenty-first centuries that good American nationalism is one that puts global prosperity and being a good neighbor and benevolent hegemon first....

-- Brad DeLong

libezkova -> anne... , February 21, 2017 at 08:00 AM
Attempt to cover the nature of American neoliberal imperialism ?

[Feb 21, 2017] We need to focus not on what is happening on average - as GDP leads us to do- but on how the economy is performing for the typical citizen, reflected for instance in median disposable income.

Feb 21, 2017 | economistsview.typepad.com
RGC : , February 21, 2017 at 07:31 AM
Re: Joe Stiglitz: How to Survive the Trump Era - Joseph E. Stiglitz

Joe says: "One of the main challenges in this new era will be to remain vigilant and, whenever and wherever necessary, to resist."

I disagree. I think we need a clearly articulated alternative to Trump and I think Joe provided one in his recent comment:

Joseph Stiglitz Says Standard Economics Is Wrong. Inequality and Unearned Income Kills the Economy

The rules of the game can be changed to reverse inequality

http://evonomics.com/joseph-stiglitz-inequality-unearned-income/

In that comment Joe says:

Reversing inequality

A wide range of policies can help reduce inequality.

Policies should be aimed at reducing inequalities both in market income and in the post-tax and-transfer incomes. The rules of the game play a large role in determining market distribution- in preventing discrimination, in creating bargaining rights for workers, in curbing monopolies and the powers of CEOs to exploit firms' oth