Wednesday, November 20, 2013
Extreme income inequality is dangerous ground for America. A robust economy is based on a broad middle class making a good income where they can afford to purchase, not only to cover their needs but their desires for entertainment and comfort and personal style. Small businesses in each of their communities cater to this middle class selling goods and services and hiring staff when they need to- to meed demand.
The 1% buys a lot of stuff but it cannot keep communities all across America robust because they are only 1% of Americans. And they can't spend billions on their own desires. Many millions maybe, but not billions...
Make sure you get an accurate perspective on how serious our income inequality problem is. Most Americans do not understand the extent of it. But right here we are going to attempt to gain a perspective on how serious a problem this is.
Now, make sure you see the conversation on the causes of this huge inequality. There are all kinds of reasons for income inequality- structural, political, philosophical... but the situation is not sustainable as it is. We all need to grasp the seriousness of the predicament and get engaged and elect politicians who understand these issues- who are ready to think deeply and act decisively to move towards a better balance of wealth and income in America.
A vibrant economy depends on a growing demand for goods and services. Make sure you understand the basic business cycle. A thriving economy requires a broad array of people spending money to make it work. A vibrant economy cannot work when enclaves have absurd levels of income, and vast patches of the rest of America have shrinking incomes, and a diminishing demand for goods and services. This creates instability and heightens risk of economic collapse.
Continuing inequality is not good for America. It is corrosive to the American dream. When the middle class is strapped for money and opportunity to make money- they cannot afford to spend and less spending caused businesses to fold- employees to get laid off and even less money in the hands of people to spend. I am talking small business here- and, specifically, small businesses right here in North Texas. Have you noticed how many restaurants have gone under in the last few years. I have always had a tender spot for Chinese all-you-can-eat. All of the ones I enjoyed are now closed.
We really do not understand the unintended consequences of a burgeoning income inequality and the shrinking of opportunity in America for middle and aspiring middle class. People hungry for new opportunity for wealth and income- participated in a home equity bubble that promised new wealth as home prices skyrocketed. They took advantage of low interest adjustable rate mortgages to extend their ability to pursue the American dream- and then the bubble burst. ARMs came due- interests rates went up and people could not sell because the bottom had fallen out of the market. People quit spending, demand fell for goods and services, people lost jobs, they lost their homes and the Wall Street bubble- built on toxic assets, blew up.
Ok, my point here is not to write a history, but to draw a circle around the point of how much of all this happening was a result of unintended or unanticipated consequences. People reacting to a diminishing ability to find jobs, make a living and maintain their standard of living as wages dropped and opportunities dried up, were ready to grasp at a bubble because it promised income- a way to make money but in fact the bubble bursts and leaves them much worse off. And the problem which originated in a steady capture of wealth and income in America becomes a faster trickle up to the 1%.
The net affect of the bust was big banks were bailed out, but people were not. This was a huge shift in wealth as capital moved back into these depressed markets and picked up homes for dimes on the dollar waiting for recovery. They net affect was and will result in even more concentration of wealth in America as the housing market returns to a new normal.
The point here is the trends causing the shrinkage of the middle class, fueled the housing bubble and the housing bubble exacerbated the income inequality crisis and even as the housing market returns to a new normal- good or bad- depending on how much capital you have- how much income you have- which side of the income inequality gap you ar on- all these events have just made income inequality worse- making the economy more unstable and put our fellow citizens at more risk with less income, and fewer visible opportunities to make things better.
So loss of income, more time spend unemployed or underemployed leave cash strained Americans with cars falling into disrepair- homes waiting for structural repairs- leaving people with more incuberances standing in the way of them striking out for new horizons- ready to take a risk. And now rampant income inequality is impacting the spirit of America- hindering the paths to upward mobility for Americans. Once this was a great strength for America. Not again until we solve our dilemma with income inequality.
Inequality and economic hardship over a period of time harms people's spirits.. American success is build on risk takers. Ready to quit a job and strike out with a new idea. Ready to pack the bags and move to a robust area of the country.. Well, this phenomenon in America has greatly slowed. Exceptions are in areas where fracking is bringing in new sources of oil, or where industry is moving towards less expensive labor. These paths do not mean robust income growth for Americas even as these endeavors improves return on capital. Fracking and new oil and gas energy is commodity development in a boom and bust growth cycle. This is not long term growth that adds to the long term foundation of American success. Industries moving to take advantage of lower wages is, in aggregate, a loss of income for Americans.
There are hotspots of entrepreneurial activity around high tech in rarified parts of the country, but while these generate great wealth, the number of people involved are small and the result of the new tools are even more human productivity- which means more wealth, and fewer people needed to create that wealth. Understanding technology and robotics is critical to understanding how we got here and why we need to change some serious attitudes about income and work in this nation. as much as it once did. This factor is exacerbated by income inequality even as the loss of mobility causes great problems with income inequality.
People are frustrated and angry. Opportunists are happy to take advantage by instilling fear and inciting rage. How many Americans understand what is happening to this economy? How many have time to stop and study what is going on- what with two or 3 low paying jobs to try to make ends meet? What will racing around and trying to keep the head above water?
Americans are long suffering, and full of optimism and hope, but they do have eyes and ears, they do watch televisions, and pay attention to social media, and they do not have infinite patience. There is a lot of anger and frustration in America. Anger can be displaced and misdirected. There is a whole myth industry that obfuscates truth and distracts from the real structural issues. We have to understand and deal with our real challenges or our situation will only become more difficult to solve.
American's patience can snap. It has in the past. It can happen again. We do not even realize the unintended consequences of such inequality. Our government and economy work on trust and common interest. People cooperate and things work. Grocery trucks show up in the early morning and our shelves are full. Our smooth running society runs on cooperation. We must realize that we are playing with fire, to screw with people's lives, to not provide opportunity for young people.
High levels of inequality is more in the nature of a banana republic. I hope that name still means something. A wealthy elite in charge and a large and restive populous dependent on the graces of the wealthy elite is not a good situation for growth or stability in society. While it might feel really good to be sitting at the top- when you start a game of king of the mountain, you can get tossed off. History tells us what happens when wealth gets really cozy at the top- when it loses empathy or understanding of those at the bottom. Americans are a warlike people. We are happy doing our own thing, but when we rise up in wrath, we are tenacious, creative and have been very successful warriors when needed.
So I hope everyone gets a pretty good idea that a continuing trend of wealth collection at the top in America is not a healthy thing. I know I missed many reasons why this is so bad. Feel free to add your thoughts. And also tell me why so many people are ambivalent to this situation now? Like an earthquake- civil unrest is calm until it isn't. We really need to do something serious about income inequality. Lets discuss what we can do here. So what are you going to do? What would you like to add?
Saturday, November 16, 2013
I write about this huge myth- misunderstanding or willful plotting- a lot because it is such an important issue as we come to grips with real problems and real issues in this country. I will add in a variety of links and topics on this subject- but let me put this whole concept of a government deficit as a huge and growing problem to rest in one simple concept.
How else do we reach out and create the full economy even as our technology puts people out of work... why- if in any one year we spend money to fully fully utilize all the products and services that are able to be provided by America's businesses- why would we consider that a debt that we owe?
In fact, if money is not spent we are not fully utilizing all the value our economy was able to create in a given year. Where can this money come from? It can come from consumers and businesses- but with a struggling economy and tens of millions out of work or underemployed how are consumers going to create enough demand and why would business invest more when they know demand is down because the economy is down.
So why should not the government invest - increase the "deficit". What to invest in can be a national dialog... wouldn't that be a pleasant change in the wind coming from Congress.
Imagine government spending creating a demand for products and services much closer to full employment and full utilization of our human talent? It is just filling out the budget to cover lost production.. If we do not do this, there are investments lost forever because the time when they could have been made are lost. This is the true loss for our future generations. The cleaner water and air we could have invested in... a more robust health system... green spaces...
And, the Federal Government does not have to borrow to spend. Here is an interesting link describing how the Federal Budget does work under Fiat money. Stop and move beyond your present thinking about the Federal deficit. This mythologizing about the dangers of national debt are debilitating to growing the economy and putting people to work. We need government investment. We have real problems to solve. Solutions that start with investing money in the path to solutions.
What would you like to add here?
Even while we have over 11 million Americans out of work in this country and millions more underemployed, and millions who are paid low, low wages, people are still worrying about potential problems with inflation.
How can there be inflation when demand for goods and services is off by trillions of dollars and millions people are ready able and anxious to go to work to help companies across America produce goods and services. No, there are still worry warts and special interests that say investing government money would create inflation, and particularly stagflation.
We have experienced stagflation in America. It took place in the 1970s and it is really important to understand the right lessons from this period or we are liable to take the wrong lesson from the experience. It is easy for ideologies to turn history on its head and misshape events to fit their preconceived notions.
Stagflation is a great example.
I could stick this widely expressed idea around the neck of several authors- but let's quote Bruce Bartlett ...
Although Keynes’s theory was most appropriate to the Great Depression, his followers did indeed believe in its general applicability and the Keynesian medicine was overapplied and misapplied during much of the postwar era, leading to stagflation in the 1970s. Conservatives like Professor Buchanan were right about that.
You should never discuss the causes of stagflation without acknowledging the biggest factor in the origins of stagflation which was the oil embargo of 1973.
In October of 1973, the Egyptians came up with a plan to attack Israel across the Suez canal into Sinai. Egypt had lost the Sinai in the 1967 war and wanted it back. They plotted with Syria to attack Israel during the holy days of Yom Kippur thinking the could catch Israel and its citizen army unready.
Egypt bought great water pumps from Germany and used them to wash down access routes into the high sand berms on the Sinai side. This discombobulated Israeli defense strategy- Israeli strategists figured they had more time to spot and deal with attacks here... and things were nip and tuck for a few days.
The Syrians had also opened a second front in the Golan heights- but after the 3rd day, the tide of battle turned. You can look up in the wikipedia on the Yom Kipper war for more info . The October war the last war between Israel and Egypt to the present day with both sides learning valuable lessons from this experience.
The United States played a key role in coming to the aid of the Israelis- this was a different era of Isreali American relations- this was also deep in the Cold war where the Arabs and Israelis played out in the struggle between the USA and the Soviet bloc,
The Arabs were not happy with US involvement supporting Israel. Here is how the wikipedia says it.
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC (consisting of the Arab members of OPEC, plus Egypt, Syria and Tunisia) proclaimed an oil embargo. OAPEC decided to retaliate against the United States, announcing an oil embargo. It lasted until March 1974.
Ok, so what is the big deal about an oil boycott?
At that time, we had no strategic oil reserve in this country. That came later. Our entire economy was built around cheap oil. However, by 1970 our reliance on foreign oil- and predominantly Saudi oil was- devastating.
|The huge jump in the price of oil impacted the entire economy and created a cost push inflationary cycle with reverberations that became what was called stagflation. The price of oil had a huge impact on the economy running up to the price highs and a great bit to do with the recovery later as the price fell.|
- image swiped from the Prairie Research institute in Illinois.
Oil impacted the entire economic supply chain in America. Imagine your next visit to the pump if oil was suddenly over $300 a barrel or $500. This is much scarier than zombies.
There was also a shortage of oil and gasoline not just much higher prices. I was in California in 1973 when gas lines formed. We drove all night to get out of California and back home in Skagit Valley, WA. We picked up some gas at an open station in Oregon along Interstate 5 about 3:45 in the morning.
OK, this was a classic case of cost push inflation. Price of oil resources goes up and every level of the economy has to adjust prices upward. Prices of services go up because it makes products and transportation must more expensive. Workers demand higher wages. Even as prices are going up the economy is tanking because of the disruption. Like ripples on a pond, transient effects of the oil crisis reverberated through the economy and took years to settle out.
This is the biggest cause of stagflation and economic disruption in the 1970's. It was not Keynesian fiscal policy. The oil crisis caused a stagnant economy with fast rising inflation. There were some political carrying on which had an impact. Richard Nixon- a republican even tried wage and price controls for a while. But the big culprit was the oil crisis.
Stagflation finally came to an end when the price of oil stabilized and actually came down as other producers came to the front with the big jump in prices and OPEC lost most of its power to dictate prices. Saudi Arabia became a great partner in pricing. They understood to sell more oil the advanced economies needed energy stability.
This is such an important lesson to understand because all of our present worry about inflation is misplaced. Government investment is not a big creator of inflation.
Government spending would have to create such demand for goods and services as to reemploy millions of Americans- actually get the economy humming along and then continue to overspend until demand exceeded our economic ability to produce the goods and services to meet demand. We could cut back on government investment, and deal with potential inflation well before this might happen.
A real threat of inflation and stagflation more closely relates to a shortage of energy sources in the world. We have outgrown our supply of fossil fuels. We are discussing inflation issues here, not climate change which is another national security issue- but there is a critical shortage of fossil fuels and energy coming.
World oil and gas production has peaked in the world, even as we are bombarded with happy news about the oil boom in America do to fracking. This new production will help taper off the descent from the World peak production numbers when they occur. This is a national security issue that looms as a potential disruption which can bring on another even more serious bout of stagflation in the future. This is a national security issue which needs to be funded by government investment. Government investment can help us plan a stable future with plenty of energy or we can continue the path towards crisis energy management.
Fresh clean water is becoming another precious resource even as we have always had all we needed in America. This is a national security issue. We certainly know this is a big deal in Texas. We are hearing more and more about it all the time. Now even the well watered areas of the country are overtaxing their natural water resources.
So why do politicians spend so much time ranting about non crises like potential inflation- when we have so many real issues to deal with- using the tool of Federal funds?
Does anybody else feel nervous about trusting Big Oil to solve our energy problems when they are making higher profits as oil prices raise? As they acquire more power because of the fealty of legislators who pocket the money and buy into the idea that Big Oil is the solution to our energy need? Who thinks that "drill baby drill" is a long-term solution?
Have you stopped to think of the natural conflict of interest between our American interests and the interests of big Oil? They are not the same. They are in conflict. So who else feels nervous that so many legislators are in fealty to these big companies.
OK, I have veered totally off subject here. We will discuss understanding the conflicts between our national interests and the special interests of Big Oil separately....
So I leave you with one last reminder of our main point here. We have to understand our real challenges and not get bogged down in or distracted by mistaken lessons from history about the fears of inflation and stagflation.
We must understand the real potential for inflation and stagflation. We have issues with natural resource shortages that can create new and even more serious stagflation in the economy. We need to learn the right lessons from history. We cannot see government investment as a mistaken cause of stagflation but must look beyond the ideology and address real and known issues while we have the time and resources to plan and think with wisdom.
Any questions or any thoughts, speak right up...
Wednesday, November 6, 2013
It is a small tyranny wrapped with a thin veneer around the idea that they want to prevent voter fraud. The real problem is they have power, they want to keep power, but the forces of good and fairness are growing. The powers of tyranny had to figure out how to put a finger on the scales of justice. They have created new voter ID laws to discourage "all those other people" in Texas from voting.
They don’t want to give you a hint that you have power in Texas. They don't want you to realize the majority of Texans think like you. If you don't get up and act, well you will never know the power you share with other thoughtful Texans.
We have the lowest turn out of any state in the Union in Texas because people have just given up and turned over the reins of government to loud and rude and mean people.
This is the time to get it back. And you need to register. And you need to try and vote. And every Texan that is burdened down with regulation needs to make a fuss, and stand up for their rights as an American. We must defend our rights as Americans to vote- for our children, for all children. Denying the people a vote is a path to tyranny and we must struggle against tyranny at every step.
Come join us, Claim your right to be involved in the future of Texas and the future of America. May the best ideas win in debate and may everyone of you be involved in the process of looking at the issues, and making up your mind the right policies going forward, and the right people to lead us and exercise your right to vote for them. This is the legacy you leave to future generations. Lets all claim it for ourselves.
The next critical election is in November 2014 when Wendy Davis gives us a real alternative to a new direction in Texas, and when we will be again electing all of our representatives to Congress. We will also get to weigh in on a senate seat. We will continue this discussion as we move forward to a new Texas- not necessarily Blue- not all Red- but instead a shade of thoughtful.
We want politicians who have empathy for what is happening to Texans, and who are ready to watch out for our interests.We need to elect women and men who are ready to deal with issues faced by Texans through a lens of what is real not through ideological eyes.
People are already hard at work registering new voters, getting registered voters engaged that their vote counts for something again. Take a deep breath. Imagine the fresh clean air of a new political climate in Texas. Lets get it done.
Thursday, October 31, 2013
This is not time to be on the sidelines watching All kinds of angry and ideological people for their own collection of crazy reasons are arrayed against progress and we really do need to get our thoughts engaged and our butts in gear to change direction and get some serious problems solved.
If you understand the concepts that I am trying to articulate here., because you are the rational caring person you know you are- you need to get engaged in politics- you can volunteer in some easy way- until you find your niche- until you feel comfortable among new cadres- to help draw busy and preoccupied people back into the political process.
Otherwise we leave ideologues who are wrong but fully engaged getting their way. They are upset about many things. they are upset about an America changing from white to brown- or some other underlying neurosis that bubbles up in political nonsense.
Now, all the problems we have are complex and government does not have all the answers- not democrats not republicans either- but bright people engaged can make a critical difference.
We need to change directions, and thoughtful people must engage or the ideologues can continue to stonewall, to disrupt, to obfuscate, to make up ridiculous stories about welfare cheats etc. that hurt people.
We are in this together. The nature of an economy is that growth- an increase of demand for products and services- creates more growth and an expanding economy.
When we help people get political clout- when we turn away from stupid- it helps all of us be more successful- find more opportunity- create more wealth and security for Americans. Get engaged.
Sunday, October 27, 2013
Can you imagine a world where the politicians were actually interested in how well government worked and concentrated on making it work more effectively? Does it seem like politicians spend most of their time just posturing for personal or party gain?
Here is a view of how government works from outside the bubble of political partisanship. What can we learn from this experience?
|A nice smile helps alleviate the aggravation of encountering glitches. Personally, I am waiting until it works.|
Clay Johnson has had some strong words for healthcare.gov. Why should we listen to Clay Johnson? He is an expert at large complex computer projects. He was one of the founders of Barack Obama's website during the 2008 campaign. He is not a politician. He is actually addressing how to improve this website- but well beyond this website- how we can improve government processes.
Clay carried on this discussion with Ezra Klein from the Washington Post.
First, Clay said "Generally in technology, smaller products that iterate into becoming larger after they get in front of customers and get used tend to work better than trying to build something with upfront requirements that may or may not work out."
"The second reason is that because of the amount of money involved, government becomes really afraid of failure... [which] leads them to only want to work [with]... entrenched vendors who haven't really had to compete in the world of technology."
A third reason - "there aren't enough people inside government with the technical knowledge to oversee this stuff. In 1996, Newt Gingrich and the Republican revolution took out this Office of Technology Assessment that was kind of the digital brains of Congress." and he noted a paucity of technical talent in the executive branch... "the executive branch has a chief technology officer (CTO) but many other agencies do not."
Clay went on to describe the problem of complex and arcane bidding documents that require companies to be expert at complexity within the bid documents and understand the nuance of the bidding process rather than actually being an expert in the services to be provided in the contract.
Clay described this situation must more succinctly than I.
"These purchases are governed by first the federal acquisitions regulations and then each department has its own regulations. Because of that, the people who get awarded the work are the people who understand these regulations the best, not the people who can do the best job."
Clay goes on to make several other powerful points about issues in the Federal Procurement Process which need to be changed.
Now imagine the colossal battle between lawyers and lobbyists and their well paid politicians to try and improve this process. And this requires optimism that the whole process can move beyond hyperbole and demagoguing on issues to make political points for re-election.
So what easy lessons are there to see here?
And why is government so scared to fail? Are their partisans ready to jump on every mistake and try to make political hay out of it? Hmm... I should be a comedian.
And do large contractors have too much pull in the halls of congress- being much better at generating influence than actually getting innovative work done...
So what are the answers?
I certainly don't have them all, but I certainly do not like how the existing system works and I do not like the complete lack of a feedback cycle and a thoughtful process for determining way to do things better from which we can create positive change in procedure and process.
What if politicians looked at the bruhaha over Obamacare and healthcare.gov as something to improve to better serve Americans. What if we all
- We saw this as a learning experience?
- What if we asked the question- How could we make government work better?
- How Could We Make Government more responsive to people's needs?
What do you think it will take to move Congress back to a time when it seriously discussed the issues of the American people in Congress and tried to make things better?
Remember that in 2014. Think back to how your elected representative performed as a statesman in the last legislative term. Do they need to be replaced? Think about that. We do need to go in a different direction- don't you think?
So what have you got to say?
We are going to deal with structural issues first.Lets make sure we all have a grasp of the problem. This short video can really help.
We have lost a huge number of jobs over the last 50 years. This is an arbitrary time frame, because the previous 50 years moved us from an agricultural economy to an industrial economy where millions of jobs in agriculture were lost and Americans were absorbed into the burgeoning industrial economy. This was a traumatic disruption that were the roots of the great depression. We can learn many lessons for today from the depression era LINK but lets do that separately.
Technology is great. It improves productivity. Improved productivity means we can build more products and provide more services with less people power. Less people power means fewer jobs. Our great advance in our era is just how good we are at taking people out of the work equation. This is great for productivity and great for producing profit and return on capital. It does create income inequality because more income goes to capital leveraging technology than people struggling to find a new job, to find a new opportunity.
This does create severe imbalances. People are not commodities. You are not a commodity. What you need are ample opportunities to fit into the economy that you can pursue for your personal fulfillment and for income to support your family. What you get instead is a rapidly changing society where once thriving industries are struggling for survival, and the vast majority of jobs available are low paying service jobs which offer little opportunity for advancement and where even robots threaten to take jobs from fry cooks. LINK - What are we going to do with people?
Lets look at some historical perspective. By 1973, the productivity of U.S. workers had risen 96% since 1945, and average hourly compensation rose in tandem—94 percent in the same time period. This was the golden age of blue collar America. You could, with a high school education or less, find a job. You could go out and apply for work- fill out an application form with a pencil- have an interview the same day, and pretty much find a job quickly. Author Edward McClelland gives a great personal favor for growing up in the 70’s in an auto making town in the mid West.
But in the decades since the 70's there have been huge changes in labor and the nature of and number of jobs. 60 years ago one-third of the American workforce was in manufacturing. Today, less than one-tenth is in manufacturing. Millions of jobs have been lost and while other jobs have come along and we have had great innovations in technology and innovation; when you get to the end of the equation-
- there are fewer jobs,
- the jobs available are either much more complex and require much more education and learning and specialized human nature, OR
- much more dispersed and diversified, service oriented and low paying.
Make sure you understand that as a nation, we have never been wealthier. Increased productivity- the ability to deliver more products and services makes the nation wealthier in aggregate. Here are some thoughts on America's wealth. We have a problem with distribution of wealth. We have a severe imbalance of income between where the richest 300 Americans have more wealth, more income than the poorest 85 million Americans. Here is a great infographic on wealth distribution.
Severe income inequality is a really serious problem for our future. It is a problem especially for poor people but also for wealthy people. I am not exaggerating here for a political purpose. Severe inequality tears at our social fabric. It distorts our economy. It creates unintended consequences- most all bad.
We move on to discussion of solutions later, right now we need to work on our perspective here. If we don't know the roots of the problem, fear mongerers find it profitable to rabble rouse and get people angry. We need facts and passion to do something about it. Not just fear and a passion to react angrily.
In the next three decades, from 1973 to 2011, worker productivity rose another 80 percent but hourly compensation only grew by a little more than 10 percent. Ordinary Americans were being cut out of their share of the nation’s economic gains. Hedrick Smith gives a compelling timeline of the structural forces which have ravaged the prosperity of the American Middle Class.
Their share? is that pejorative? Well, the battle in the future to reduce income inequality has a very big political component. Hardworking Americans and Americans scrambling to find work need to stop and figure out what is good for them- learn some lessons from brazen big corporations who are very pushy about what they want- what they feel they deserve. Hard working Americans need to watch and learn here and work together to create political influence to change attitudes.... hard working Americans need to understand what is happening and develop some countervailing power.
This might be a good time to bring up the subject of the common good. What is good for America? It is often easier to see what America needs through our own eyes and experiences, but we need a broader perspective.
Millions of jobs were lost overseas. Technology has also provided the means to send millions of jobs overseas. Broad pipes of information- powerful software tools allow the sharing of key information where products can be designed anywhere and sourced somewhere else. Technology has empowered a variety of services. Bookkeeping and accounting services have moved overseas. Software writing, graphics, and website construction have become a worldwide marketplace. OK, who hasn't had to deal with customer service on a phone line with a strange accent that you cannot understand, and who cannot understand what you are trying to say? Today, engineers in America compete with engineers around the world using advanced software and huge information pipes.
But the really big job losses took place right here in America. Once powerful industries have shed millions of employees as they try to deal with the turbulence caused by all kinds of technologies. Publishing, once a dominant industry, is on the ropes, as newspapers are expensive to produce and slow to keep up with the 24 7 news day and thousands of sources of information on the Internet.
Lets revisit our discussion of technology and robotics and this impact on employment and income inequality. Robotics and technology take human hands out of repetitive tasks. How many can we think of? Feel free to add your thoughts in the comments.
It is pretty near impossible to list all the jobs taken by robotics or on the list ready to be taken by robotics. When is the last time, you bought gas and had no personal contact with anyone for the purchase. This is huge. Have you visited your local QT recently. All kinds of food to buy there. Machines whir and spin burritos, tube meats- all without the hands of a cook, just someone to watch and replenish the food stocks.
Who remembers what a secretary was or did? Remember when typing 70 words per minute was a resume skill? Robotic systems mix drinks without liquor losses. Robots vacuum floors, scrub and polish- mow and manicure lawns. Any repetitive task can or will be done by a robot.
What does the future look like with Robots?
The sad state of politics and the exercise of exploitive political power have exacerbated income inequality.
Politics as usual has only made income equality worse. While it would be practical to have a free ranging conversation about how things are and what we can do to make serious structural changes- we are instead caught up in politics and a maelstrom of BS to obfuscate, to manipulate, to motivate for political gain.
But we are at fault too. Too many of us are busy and distracted. Who has time to spend studying our national problems and thinking about solutions? Especially when we are working long hours, and stressed out by all our challenges. Well some of us do, and we have to be the lightning rods for change. We have to be the leaders. This is too big a problem for the class of politicians we have right now. We need leaders. We need statesmen. We need men and women with courage and strength and conviction.
What do we do? How do we create economic growth in America? Great question. We address that next. LINK Feel free to add your thoughts below.
How did we get to this point? What are the causes? We looked at structural details here.
Maybe you don't really see why income inequality is such a high priority problem. We gather our thoughts on the seriousness of the problem here. Maybe you can contribute.
We need to focus our attention on income inequality. We discuss solutions here LINK .
We need your help. We don't need more millionaire politicians whether they be republican or democrat distracted by the usual BS. We need clear and cogent thought and we need a minimum of business as usual. Get in, get engaged. We need your compassion and your energy. There is a dearth of leadership in America. Plenty of room for you. Jump in.
Feel Free to add your thoughts below.
Sunday, September 15, 2013
Not enough jobs. The jobs being created are low pay, high stress jobs. Today's youth compete with grown adults for jobs in fast food restaurants- which in another age, were introductory jobs- jobs you took where you learned responsibility and where you had every incentive to move on to another better paying job. In 2013 these low paying service jobs are what people are trying to build a future around.
The very things that have made us richer have reduced our need for human labor. In past decades, humans, sorted widgets, did repetitive labor in factories. big burly guys wrestled pig iron and hot ingots in foundries. 10s of thousands of people worked at power looms to create fabrics. Productivity has multiplied many times over and many fewer Americans do these kinds of jobs.
All these advances are good for America. Here is one for you. Working on the exterior of buildings used to require elaborate scaffolding. Today, modern systems are much safer and they pretty much put themselves up. This is great. Makes us more productive as a culture.
But what do we do with the people no longer needed in these repetitive jobs?
Once upon a time, businesses had typists and stenographers, and human hands to do all the things that computers and technology do now. This means we are much richer as a nation. It means we are challenged what to do with people. There is ever growing crescendo of progress linking technology with digital software. We see an accelerating pace of labor saving tools, devices, industrial processes...
What do we do with the people put out of work by labor saving processes?
And then we have to talk about robotics. Robotics make us much more productive and prosperous as a nation. It leaves people without jobs, without income and stressed out.
So what do we do about the gathering of wealth in fewer and fewer hands and the gradually weaning of working class people of opportunity?
How many jobs in America have been shipped overseas in the last decades? Well we talk about that here. but in we need to address it in the context here. Outsourcing of jobs has made America more productive. We learned that we could produce goods for less overseas.
Was there a more enlightened way to improve productivity in America without sending all these jobs overseas? That is a huge story and discussion to have later. Those jobs have flowed under that bridge and so what can we do from here? What do we do with people?
What do we do with the people out of work and the communities they live in?
We have to reconcile this issue, and the answer is not- and this is an emphatic NOT- because people are lazy, and people just want to sit on their couch and eat on their SNAP largesse.
We have to Toss out the BS about People Being Lazy and Come to Grips with How to Create Opportunity for People- How to come to grips with people working less because there is less for them to do.
We have to get real- deal with reality and understand that the usual BS about people being lazy does not work- the usual BS about big corporations being the "job creators" - big corporations are shedding employees in America faster than a dandelion shedding seed pods in a wind storm.
We have a huge problem with political influence by the rich and power. Too many politicians are rich and greedy. These traits are what the existing political system select for. Those not rich and greedy are often supported by special interests nonprofits doing the bidding of billionaire donors. Our American Interests do not match up well with the interests of Billionaires- with the Interests of Fossil Fuel Companies. Billions of dollars go to selecting for the right politicians in the early primaries- to influence politicians in office. There is this really ugly dance between politicians looking for campaign money and the rich and powerful looking for political favors. The results of this dance leave no time for wrangling with big intractable issues in America, but serve to distract over hyperbole and slight of hand to keep people distracted from the key issues outlined above. We move on to political change right in our own communities later- change depends on you and me being sheepdogs and helping the sheep understand what is actually in their own interests. LINK
But here we need to finish up the point. America is hugely rich. We only feel poor, and when we figure out what is happening, and get ready to do something about it, well we can and we will. We have to put aside the usual BS and understand key issues. We have see politicians for what they are and the nonsense they spout. We are rich. We have so much untapped talent. We have room for it all. We are not in a zero sum game here. We can invest, we can invest and we can innovate solutions to really serious problems. We just have to understand what really stands in our way.
We are rich here in America but we are out of shape. We have a huge problem with income inequality and it is only getting worse. It is not healthy for the 1% to hold so much wealth in America. It is not even good for the 1%. Inequality is inherently unstable. It is dangerous ground for America to be on. We discuss inequality separately but for now we have to understand the fundamental.
We can change this. We have many options. All of which the 1% will oppose. But what we do is good for us as Americans wanting opportunity, good for our kids and the youth of America and good for the future of America. It is even good for the 1% if they actually knew what was good for them. They have a serious problem. They are corrupted by having too much money.
Why do we feel so poor in America when we have never been richer as a nation? Well, we have to come to grips with really intractable and difficult issues? But we are rich. We have huge talent. We just need to adjust our thinking and elect a whole crop of new legislators.
Feel free to add your thoughts below.
Monday, September 9, 2013
Is the a problem?
Too often, This leads to cushy little fiefdoms of power and privilege where these government officials have the power to defend the privileges they have created. They don't have to act illegally to do this. They just exercise the privileges provided by small government and leave the citizens with few means to hold them accountable.
What example illustrates this problem really well? The Fort Worth Weekly's Jeff Prince tells a heart wrenching tale of a feisty 80 year old abused by the Probate system in Texas. This is such critical information, I will quote Jeff Prince
Texas, unlike most states, allows its judges to initiate guardianship cases. If a defendant in a civil lawsuit refuses to settle, a Texas probate judge can say, “I think you’re mentally incapacitated.” Then that same judge can remove the defendant’s right to hire an independent attorney and use court-appointed attorneys to settle the case in a closed hearing without the defendant’s input.
Dorothy Luck has, in effect, become trapped in a probate system where a pack of lawyers and trustees feed on her wealth ostensibly watching out for her interests. It is a sordid story you don't want to miss it, the article is called Grabbing the Purse.
This situation is no single occurrence either. The Fort Worth Weekly has covered similar disturbing cases over the years. State representative Stephanie Klick, a Republican from Fort Worth, introduced legislation to tighten up the laxness in the probate laws to protect citizens.
Ms. Klick said,
“The process for initiating guardianship needs to be tightened up,” she said. “Someone who files something with the court needs a more formal affidavit rather than an informational letter that’s not sworn.”
The process should also be sped up to prevent excessive legal fees from piling up, and the courts should put people under guardianship only as a last resort, Klick said.
“The law says they are supposed to use the least restrictive means in handling these matters, and I’m not sure that’s the approach that is always utilized,”
The law requests that the least restrictive means be used. Legislators once upon a time, were trying to keep the law simple- low regulation. Let competent people use their discretion. But the result is this gives space and allows powerful parties to act in their own interests. Maybe no malice is involved, but the results closely resemble outright theft and thuggery.
Representative Klick's reform legislation failed this session. Jeff Prince quotes a Michael Easton, a Houston-based advocate for reform, who attended a hearing on April 15 at the Texas capitol on Klick’s bill. Several judges testified against proposed reforms.
“Klick introduced a wonderful piece of legislation that would add transparency to the process,” he said. “[The judges] said it would clog up the system and cause more problems — all vague and ambiguous reasons — and that everything is wonderful the way it is.
“Do you think they want to repair the system? They are happy with the way it is,” Easton said. “Right now there is no oversight, and they can do whatever they want.”
Maybe, we need to think about and resolve the contradiction in terms between what we like as political ideas and appealing phraseology- and parse the impact of those words on laws and how they impact Texas citizens. More transparency in government is considered more regulation- but lack of transparency hinders the citizens ability to watch and understand what is in the interests of Texans.
We must reconcile the notion that adding protections for citizens is called 'clogging up the system with needless over regulation" when in fact, we need more insight to protect citizens.
Well, can we think of any more examples of government being unresponsive, acting willfully from the interests of the citizens in a manner hostile to transparency?
Tell me a state that has more powerful eminent domain powers or uses them more often against citizens of Texas. In the local North Texas area, we have seen home taken for commercial malls, homes raised to build a national league ball park in Arlington, and to build a new flood control system in Fort Worth.
Lets look closer at the noisome example of the Tarrant Regional Water District. Citizens have been complaining about transparency problems for years. The TRWD uses citizens money to litigate against having to comply with open meeting laws. There lack of accountability to the public- allowed them to foolishly waste millions of dollars to push around Oklahoma citizens over water rights. Any public entity attuned to public input could nor would have ever gone there. It was a closely held thing between politicians not held to account and their too close relationship with lawyers happy to take money for a fools errand.
The TRWD is a fiefdom all to themselves, and only recently with the election of Mary Kelleher has there been any real attempt to open the doors and air the place out.
The TRWD board have no sense of propriety. Nepotism runs rampant but there is no answering to the people. The path to fixing all this is arduous because the laws in place provide the space and "freedom" for local power brokers to build fiefdoms to the detriment of citizens and it is all built on the founding ideas of small government, and keeping government out of your business...
You probably know the key phrases used to manipulate the hearts of freedom loving hearts of Texans. We just have to figure out better with our head as to what the end result might be when we do that.
We probably need to be more discerning . maybe not reject so quickly ideas when they are smeared with the label- over regulation- big government- taking away freedom- maybe we need to look a little deeper- not automatically reject ideas when they are presented as burdensome big guv'ment.
Texans are smart and creative. If we can look beyond the power of words to numb our thinking we can come up with solutions that do not burden but provide protection. A useful synergism that works better all around.
Feel free to express yourself below.
Sunday, September 8, 2013
But just how does it affect American Worker and American cities? The results are not pretty for hard working Americans who have lost their jobs, or live in cities dependent on the buying power of hard working Americans who are now out of a job.
The academic world of economies sees this whole disruption of lives will just go through the free market process of reallocaton of poorly allocated resources.
People out of work pretty much feel this as devastating. What have we done in the past, and what can we do better. People are not commodities. Children need to be well nurtured and supported as the mature. How does this happen in families stressed out by job loss- income loss and the tetoring of trying to make house payments pay property taxes and get buy all the while trying to create a future opportunity for the children.
Too many politicians have a problem empathizing with working people out of work. Big farmers can sit in Congress and feel completely at ease with getting millions in agriculture supports for their farming interests but bridle at people out of work getting food aid through SNAP. This is a serious issue because we need a broader vision that just keeping hungry people fed- we have to free up the imagination and figure out how to create an outbreak of new opportunity in this country. People want good paying jobs not SNAP. They settle for SNAP so the kids don't go hungry.
So what do we do to create a profound transformation in this country. What will it look like. Who do we want to elect with the free thinking brain big enough to see beyond their own selfish interests. We have to get rid of politicians whose thinking fits into the narrow groove of figuring out how to get the funds from the right and powerful to get reelected. This might be good for them, but it is not good for your and for me and the 98% of Americans who are looking for an opportunity to do well in America. To again have an American dream of- if you are willing to work hard you can be a success in America.
This is not something to be left to status quo thinking. It takes a whole new level of thinging- of realization that we need to do something significantly different moving forward. More of the same, is not sustainable and will not really change things for the better.
Feel free to add your thoughts below.
Case in point- who remembers what Mr. Reagan had to say about the national debt when he was running for president? He talked about balanced budgets and returning to the gold standard.
Anybody remember Mr. Reagan's soliloquy on how much is a trillion dollars? He was making a point about out of control government spending. What did Mr. Reagan learn in office? Well, we can understand what he learned from what he did in office.
Mr. Reagan cut taxes by $749 billion. This was supposed to stimulate supply-side growth and it did provide massive annual budget deficits. Mr. Reagan also initiated a rapid rise in defense spending. Remember the battleships back in fighting trim and STAR WARS? These were just the exotic portion of defense growth.
Ronald Reagan and his administration more than equaled the entire debt burden produced by the previous 200 years of American history. Mr. Dick Cheney, said it best in Nov. 15, 2002
"Reagan proved deficits don't matter."
Thursday, September 5, 2013
I have had my experiences here, too. I beat them on a speeding ticket- on a technicality; but I did not have to do the homework Ms. Kathleen Stephens did- 50 hours of research, worked with an attorney, and subpoena a city traffic engineer. In the end, the ticket given to Ms. Stephens was unlawful because the signage involved did not meet code.
I like to see people fighting injustice and, even better, winning. It would be great to hear how Ms. Stephens pursued the key information she needed.
A side note here- I hope you find it interesting. Have you ever wondered at the level of inattention by politicians to real problems of joblessness, and underemployment in this lagging economy?
I remain convinced there is a general political lack of interest in jobs and opportunity in this country because many with power and money, do not like the idea of a well off middle class- feeling empowered and fighting for America and the middle class.
People who are struggling with underemployment and worse- unemployment- trying to feed the kids and stressed out- just do not have as much energy to pay attention to issues- pay attention to injustice.
I certainly look forward to hard working Americans, and Americans who want to be hard working- to focus in on the core issues and elect leaders who have empathy for people wanting opportunity and who are ready to fight against the bias towards billionaires and big finance.
I can imagine a reversal of fortune for the wealthy wielders of power in the halls of congress and in the white house. I see a new trend where people- even though still weighed down with the strain and struggle- find a little margin of time and energy to fight for justice, fight for opportunity in America, and take back power from the politicians who cater to wealth and power.
This great story about Ms. Stephens fighting for justice, made me smile. I like feistiness. I would like to see a lot more it. Like the army of women who trekked to Austin taking exception to politicians interfering in women's lives. Like the courageous and indomitable strength of Wendy Davis leading a filibuster for hours.
I think these great examples are giving people hope, and giving them great examples of acting up for justice. I think I feel a trend coming on in Texas. More feistiness. More justice.
Feel free to add your thoughts below. That was a rather long aside.
Thank you, Ms. Stephens. You were fighting for all of us when you went through the extra a effort to fight for your rights in Pantego court.
Wednesday, September 4, 2013
Lets start our look at the business cycle with the conditions for the economy to grow because that is what we would like to see happening.
The economy grows and people are hired because consumers demand more products and services. No business owner hires another employee until they have to- when they need another employee to help deliver products or services.
Now, it is necessary to address a few myths that are still floating around after the last presidential election; you hear a lot of talk about job creators- and that if we would just get off their back with burdensome regulations and cut ruinous taxes on them, well, they would get busy producing jobs..
Well, this is simply not true. Reduce taxes, and give them free rein to cut their costs for protecting the environment, would make them more profits and make them wealthier- and this is good for them and the elected officials that depend on their support to get reelected- but it doesn't get anyone else hired- because new employees are expensive, and no one is going to hire anybody until new employees are needed to provide services or produce new products.
In fact, any smart businessman is always trying to reduce his overhead and keep his labor costs down. This makes good business sense, but leaves large holes in the job creation theory.
So back to our conversation on the business cycle and generating business growth. It takes increased consumption of goods and services- this is often all lumped together under the phrase "aggregate demand"-
and so what can we do to create more aggregate demand?
It takes money. Who has money to spend? Consumers are generally about 70% of the nations economy, but consumers are strapped. They are laid off, scared, saving more money and being trifty. It does not look like consumers are a good bet for more spending.
Maybe we can turn to business investment? This is pretty much back to talking about job creators again. No business is going to nvest, unless they see the possibility of potential growth in sales. Now some smart business people do invest when things are slow- often buy up bargains, or figure out ways to build market share for when growth returns, but in the aggregate, business by nature does not lead the way out of a recession but wait to invest when the signs point to recovery.
So who has money to spend? The US government has money to spend. What on? Well that is a political decision that the politicians need to think deeply about. We will talk more specifics later.
We talked about how rich we are in America. Wealth is measured in potential goods and services produced, not just adding up money and measuring GDP. Money is just the means of exchange, not the real wealth. We talked about money not being a commodity nor is there any chance we are going to run out of money.
The Federal government creates money on spreadsheets. In fact, all countries in the world now are on fiat economies and spend money by spreadsheet. They can spend money wisely or irresponsibly, but money is there if you are a currency issuer. This is as compared to a currency user. We talked about that here. This condition makes a critical difference about how money can be used. This is a critical point of confusion in people's thinking and a powerful deterrent to finding solutions to a slow economy.
The government spending money increases demand. If the government adds new employees, those new employees have more money and start spending. The companies that they buy from see increased demand and start hiring again. The business cycle is in growth.
If the government gives money to states or cities, states and cities can spend money, write contracts for projects, hire more teachers, more fireman, more support personnel at whatever level, aggregate demand increases,
No one speaks more eloquently on the subject of the business cycle and creating economic growth than John T Harvey, professor of economics at TCU. Make sure you take a look at his article in Forbes magazine- The Real Job Creators: Consumers, .
More aggregate demand stimulates more growth. The economy is not naturally stable, it is either growing or shrinking and it is build in automatic stabilizers that don't let economic changes gather speed and destructive power. These automatic stabilizers have been created by our elected representatives over the decades from the Great Depression.
Unemployment insurance is good for the unemployed, but also just about the most effective way to replace spending in the economy otherwise lost.
SNAP helps keep kids eating but also supports the food industry and jobs providing food.
When the economy grows, progressive taxes put more money in government coffers but also puts a damper on growth that might become inflationary.
For government to spend in a down economy- well it does take deficit spending. It is therefore essential that you understand the true implications of government spending.
So then arguments about government spending should revolve around how we spend, not whether we are printing money and not balancing a Federal budget. Make sure you explore the page on understanding deficit spending. We must use the tools we have, to deal with the crises we find ourselves.
We have great challenges around which we need to invest. It makes sense. Rebuild America. Invest in research to solve Carbon pollution problems. We need new fossil fuel free transportation fuels. We need reliable and steady sources of carbon free energy. We have water issues to deal with- and air and water pollution we cannot afford to live with. LINK All this research, all the infrastructure investments needed in transportation, in energy efficiency, in all the things congress says we cannot afford, need to be done and people need jobs. Lets get it done.
Now, this is not a conversation most politicians are even willing to have. At the present time, budget deficits can stoke up primal fear- much like an accusation of being soft on communism could create in the 50s and 60s.
No politician can talk about government investment unless they make the obligatory gesture to balanced budgets in the future. Politicians right now are happy to keep the economy depressed- and millions of people unemployed- millions more underemployed, and live with impeding challenges that should be considered national security issues, just because of the power mythology about government spending.
Please look over this site. Please look at some of the other references provided and think for yourself.
What is good for people? Is austerity working anywhere. Austerity is the opposite of what I advocate here. Has austherity anywhere helped balance budgets or did it just put people into the streets of Europe demanding change? Well, I am always ready to jump into another topic....
but please think about the subjects raised here. If you have a question or comment please add it below.
Bottom line: We need sensible growth that is sustainable and that addresses serious energy and environmental issues. Investment puts people to work. Simple facts. Why are these critical investments not happening?
You need to know a guy named Warren Mosler. Multimillionaire who understands how the economy works. In fact, it made him super wealthy. He has a great resource called the Seven Deadly Innocent Frauds of Economic Policy
And you might have already seen me reference Fort Worth.s own brilliant economist, John T Harvey. He is a professor at TCU. He has an excellent article in Forbes magazine that touches on these same issues. Why the Private Sector NEEDS the Government to Spend Money
Monday, September 2, 2013
Inflation is a very serious issue, but not for any of the reasons you hear from financial pundits. Neither printing money nor our deficit spending are a serious source of inflation at this time in this country. When we have millions and millions of underemployed and unemployed workers- well- we are operating well below full employment. This means consumer demand is way down. How can we create demand pull inflation with the present level of deficit spending? Make sure you see the notes on what money really is, the implications of our fiat currency and the discussion on deficit spending.
John Harvey, an economics professor at TCU and an overall fairly sane guy, has written a great article in Forbes magazine about inflation. Inflation is a serious issue but not in the way we hear about it. In fact, the specious arguments you hear on inflation only exacerbate the real issues we must come to grips with. Check out John's article here. It is essential that you understand the real causes of inflation, because we have serious challenges to overcome, and the prevailing wisdom at this time is part of the problem not part of the solution.
There are classic horror stories about hyper inflation with the implication that we are on the fast track there when we are printing too much money and deficit spending. Monetary Theory says that hyperinflation is caused by printing too much money.
Hyperinflation is more complex than that oversimplified explanation, yet all cases of hyperinflation have similar causes. We discuss hyperinflation here. Both the Weimar republic and Zimbabwe are discussed. Check out the photo of a 100 trillion dollar Zimbabwe note... These two tragic occurrences- millions of people were hurt by hyperinflation- but hyperinflation should not be concern for standing around with so many people out of work or underemployed in America.
It bears repeating. When we have millions of idle Americans looking for opportunity- our demand for products and services is way down because so many cannot afford to spend as they would wish. There are millions of things Americans might buy if they were working or working in a better paying job. Aggregate demand is missing. People cannot afford stuff they want. Aggregate demand is needed to push businesses to hire new people because they have to to meet consumer demand. And the economy grows, and then business gets excited and boosts investment, and the government collects more in taxes... So instead of doing smart things to fire up aggregate demand, there is an overwrought worry about inflation. It makes no sense. People will not be going back to work in the numbers needed for a robust recovery until we figure this out. Incidentally, John Harvey also has a great article on aggregate demand and job creation. WE DEMAND AGGREGATE DEMAND!
But the threat of inflation does hang over our head. This is cost push inflation.
There are big challenges that we face that will be inflationary if we don't deal with them. Inflation is a serious issue- to important to let idle bloviators corner the subject with myth-making for their own purposes. We need facts and perspective, not fear mongering. We have serious challenges with sith peak cheap oil, and sustainability and climate change which will be highly inflationary if we do not as a nation grapple with these national security issues.
Sustainability is another huge national security issue. You don't hear as much about this unless you are looking for it. But the earth is on an unsustainable course, where, if we do not look forward to diversity loss- if we do not stop pollution of the oceans- we will endanger the lives of our children- at least doom them to a battle of survival much tougher than our own. We will address diversity and environmental issues here. LINK CATEGORY
The future will see a crisis with fresh clean water that will be even more destabilizing than high oil prices and more disruptive to the status quo that oil embargos.
Climate Change and Ocean Rise are key factors that will impact America's ability to create a robust economy and provide the basics for opportunity for our children. Yet, the powers that be- have the vision of a politician who needs to be elected in two years, a power broker who is looking to make his own nut- and not worry about anyone else- or a corporation where profit and loss is the guiding light and a path forward for economic growth unimpeded by outside unrelated interests- our national interests in reducing CO2 emissions and clean water and clean air. We really do need a clear vision as to how much our national interests are not aligned with big oil, and big banks. We discuss this here. LINK
Feel free to add your thoughts below.
John Harvey, I sing his praises often, also has a cogent article on fallacies about the government deficit. You might find it entertaining but I hope it helps you grasp the numbskull thinking that debilitates our very best tool against economic recession and a critical to deal with the challenges of the 21st century- the real challenges not the faux crises over money and deficits and debt ceilings. We have real serious issues.
But as soon as you start talking about what we can do- there is an outcry of fear mongers, special interests and naysayers who raise their voice to say why we cannot do this.
One of these loud screams centers around the theme of "you are on the road to hyperinflation!" Stories of the Weimar Republic are told. Zimbabwe is brought up and a damning description of how we are on the same road to ruin- makes people shudder and nod that we cannot go there.
Well, there are lessons to learn from periods of hyperinflation. We need to separate the truth from the fiction. We have really serious challenges in this country and we need a firm grasp of the challenges and the tools we can muster for solutions. We need government investment, and so therefore we need everyone to better understand the true ramifications of using money. We have to separate the faux issues from the real challenges, LINK if we want to progress to a prosperous future. We stand in our own way otherwise.
Talking about hyperinflation gets rather complicated when you go into the details. It is much easier to show pictures of 100 trillion dollar Zimbabwe notes than to go into the myriad of details that took Zimbabwe down this path of ruin.
When issues get complex, it is essential to find sources that are as simple and coherent as possible without being too simple. Many others tell this story better than I. Therefore, I will keep my notes brief and rely on others. I also admonish you to dig down a bit because the simplified canards about hyperinflation tie our hands to deal with unemployment and future opportunity, environmental pollution and energy issues, and all the other challenges we face.
We are the equivalent of being at war but without a well defined enemy. We are living on a finite earth in an unsustainable manner which is the equivalent of being in a war you are losing. If we cannot bend the trajectory we are on, more millions will die every year as nature takes its course. We travek this philosophical path here. LINK but right now we are trying to create clarity around the concept of hyperinflation.
So lets briefly discuss the Weimar republic first. I am going to paraphrase information provided by economist L. Randel Wray. He wrote 3 articles- they are erudite but not your usual light read.. at least for me... You can find the series here.
Germany had lost WWI and was suffering under the burden of large reparations payments— payable in gold.
[caption id="attachment_185" align="aligncenter" width="300"] I inherited a coin collection as a kid with a lot of Weimar money in it. I learned about hyperinflation at an early age.[/caption]
Weimar Germany's productive capacity had been ravaged by war, and by removal of industrial equipment by France as war reparations. Weimar had few gold reserves but was expected to export goods to raise more gold to make the payments demanded by the victors.
Germany’s productive capacity could not satisfy domestic demand, much less goods for export to pay reparations. The Weimar Government knew that it was not only economically impossible but also politically impossible to impose taxes at a sufficient level to move resources to the public sector for exports to make the reparations payments.
Instead Weimar relied on spending. This meant government competed with domestic demand for a limited supply of output. This drove prices up. At the same time, Germany’s domestic producers had to borrow abroad (in foreign currency) to buy needed imports. Rising prices plus foreign borrowing caused depreciation of the domestic currency, which then spiraled out of control, as imports increased in costs, increasing borrowing costs, but then increasing the cost of reparations in the Weimar currency.
We will address the common causes after we talk about Zimbabwe.
[caption id="attachment_182" align="aligncenter" width="300"] I wonder what it really is worth[/caption]
Zimbabwe was going through tremendous social and political upheaval after civil war with unemployment reaching 80% of the workforce. Domestic GDP had fallen by 40%. Domestic food production had collapsed after controversial land reform subdivided farms. Government had to rely on food imports and IMF lending— here, again- a case of external debts. With food scarcity and government and the private sector competing for greatly reduced supply, prices were pushed up. Here was another situation where the government could not raise taxes for both political and economic reasons.
Both Weimar and Zimbabwe are tragic cases and millions of people were injured in the process, but to simply label this a simple case of government spending run amok and printing fiat money not backed by gold as the cause- does not really shed light nor explain the problems in either Weimar or Zimbabwe and certainly conclusions drawn on our own situation in America are far fetched. (my technical term)
There are commonalities which we can draw from cases of hyperinflations in the 20th century. First, most of them occurred during a civil war, with a regime change. A majority also occurred with large debt denominated in foreign currency (this included Austria, Hungary, Weimar Germany, Argentina, and Zimbabwe).
The conclusion I (Stu) want you to draw from this- we must not let naysayers tell us what we cannot do using unsupported hyperbole not backed up by real evidence and careful study. We have millions of Americans longing for a way to be productive and add products and services for Americans to buy. We have a serious problem of a lack of aggregate demand, even with a level of deficit spending by government now. So tell me again how we need to fear hyperinflation? In America?
We do have issues with potential inflation. The are cost push resources issues. Every time there is a new story that the economy is getting better, the price of oil goes up. We need government investment to solve energy issues. We need to concentrate our wits on real challenges and put the silly made up problems behind us.
">Here are more resources to better decide about hyperinflation and how much of a potential problem we have with it.
Again L. Randall Wray - Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation
Sunday, September 1, 2013
We here a lot of talk about how poor America has become. Members of Congress are always talking about what we cannot afford to do. It might give someone the feeling that America has become quite poor. Has America already seen its better days? An emphatic NO- but there is something dreadfully wrong and it has nothing to do with how wealthy America is. The problem lies in who has the megaphone and who is badmouthing the United States and what we have the power to accomplish as Americans.
Our national wealth has nothing to do with dollars, or deficit spending, or unemployment rate. These concerns are all either bogus or a result of stilted mental thinking.
Our national wealth is the measure of all the goods and services we produce in any year. Our potential national wealth is made up of all the goods and services which we could produce if all hands were on deck and adding value. Right now we have 11 million Americans unemployed. We have another 15 million who are underemployed. What if we had as many of these people working as wished to- producing goods or services? This is what we call full employment. Full employment is a worthy and achievable goal. We talk about the implications of full employment here. LINK
We do need to bring up inflation here. Not that we have a problem with inflation but a mythical fear of inflation is one of the big bugaboos that rich members of Congress worry about and billionaires worry about. Why do so many politicians and billionaires believe silliness about inflation? Well, the are either misinformed or have ulterior motives. There are a lot of ulterior motives here helping push myths about inflation and we discuss those here. Inflation is a serious issue, and we have potential problems with inflation, but not what gets talked about. We have serious challenges which can spark cost push inflation and they get ignored because we are caught up with distractions with myth-making. More on inflation here. LINK
What you and I are much more interested in is economic growth, expanded opportunities for jobs and new businesses, and a rich variety of opportunities for our youth. Nothing stands in the way of growth, but either misinformed or malevolent thinking.
But before we expand our discussion on how rich America is, we need to address the "problem of the deficit" You have seen the debt clock running and we owe 15 trillion dollars... what exactly does that mean and what are the ramifications? We really do need perspective on the national debt and the debt ceiling. Is it a serious problem or a power tool for economic growth poorly understood? Do you want to see America grow? Do you want to see expanding opportunities for you, for your children, for all Americans? Well, this is a critical question to answer. LINK
How wealthy is America?
Lets stop and consider the great wealth created by robots and technology. Remember we measure wealth by what we can produce in goods and services as a nation.
So then why do we feel so poor?
How Wealthy can it be? There is nothing that stops our economic growth if we understand investment for the future. We need to grapple with these big issues, and these are not just our issues, but issues on every continent. And when America does focus on theses national issues, and focuses on economic growth that does not create more sustainability problems, does not exacerbate our issues with clean air and clean water, and focuses on reducing the CO2 pollution; well, we will be wealthier, and we will have earned the right to be the world's leader throughout the 21st century.
We will go into much greater detail on these issues later, but right now, we need to understand that Our National Wealth can be enhanced by government investment in research and development of new energy sources, investment in infrastructure that enhances our ability to keep and source more clean water, and protect us from rising oceans and more turbulent weather. We need to empower our youth and enhance higher education in all aspects. We need to invest in creativity, in creating new leaders and in helping enhance our human talent- all of it- in America. And it is not only a problem in America, because today the national security challenges reach well beyond our borders in the natural world.
All these national security issues require government investment. That is why we must do battle with all the myths and myth making about government spending. That is the reason why I have created Stu's economic rules. That is why you must have your own set of rules based on clear thinking about what is good for Americans, not billionaires or politicians. What is good for America, for America's children and America's future.
America, showing vision, showing the determination to grapple with real issues and avoid phoney BS, can lead from vision and conviction. What is stopping us. Fuzzy thinking. Fearful thinking. Short term greedy thinking. How can change this? Not politicians. Most of our politicians today lack understanding, lack empathy, and have all together to much deference for wealth and power. We will get into this later, but a future prosperous America needs you involved. Lets build a better America. Lets build a richer America. Lets build on and build bigger dreams for the future.
Feel free to comment below.
Saturday, August 31, 2013
Now nobody misses not getting to dig ditches. It is hard on human backs, feet... all I can say is... ouch! We are all better off.
Throughout the 20th and 21st century technology has built on itself to develop ever more labor saving devices. Labor saving devices make us much richer as a country- we can produce so many more goods and services- but conversely labor saving devices save labor which puts people out of work.
This tradeoff was epitomized in a conversation between Walter Reuther the leader of the UAW in the 70's going through a Ford plant with a company manager. The manager teased Mr. Reuther about how was he going to collect union dues from all these robots... Mr. Reuther replied, " aren't you worried about how you are going to sell cars to these machines?
Great question and one I am willing to wrestle with.
How do we reconcile the huge increase in wealth in this country due to the ability of robots to do perfect work, 24 hours a day, never sick, never cranky, and the huge number of people put out of work.
Now robots cannot be blamed for the most recent financial disaster that shook the economy to its foundations in 2008, but it has very much to do with long term issues with people out of work and a huge portion of America not fully engaged in producing value and not doing the amount of consumption they would do if they were gainfully employed.
And we are seeing just the beginning of robots taking jobs from humans. Google is creating self driving cars. This means that soon there will be driver free delivery services where a person's app tells them their products are arriving at the front door and they go out to pick up what they are expecting. Now I look forward to this, but how many million delivery drivers are going to be looking for new work?
There is a big battle between minimum wage fast food workers in this country and the big chains. It should not shock you that McDs and other right now are picking up the pace on automated burger flipping. special sauce dispensing, and wrapping and... well you are going to see even fewer people in the local fast food outlet in the future.
Here is an interesting data point. I got this from the Associated Press special report that I read in the Fresno Bee
Consider the great business successes of the Internet age: Apple employs 80,000 people worldwide; Google, 54,000; Facebook, 4,300. Combined, those three superstar companies employ less than a quarter of the 600,000 people General Motors had in the 1970s. And today, GM employs just 202,000 people, while making more cars than ever.
So we have this huge leakage of employed people from the economy. What are we going to do? Well, Americans like me and you are going to have to reconcile ourselves to a battle for the hearts and minds of people that the way things are going now is not working- and we need new thinking. We have the tools to deal with these issues. The problem exists in our mind and our fascination with the status quo and with the thinking that got us to this point.
Are we going to raise taxes on the companies that use robots? Taxes are overrated as a solution to better distribute wealth. We have other solutions to discuss and taxes are in the mix but not the main driver.
We have to create space for people to excel and develop their talents. We have to create opportunity. How do we do it? We spend the money of the Federal government. It is essential right now that you understand deficit spending. Our present attitudes about deficit spending are dangerous and debilitating- especially in light of the challenges before us. LINK
We need to support creativity and talent. We need to invest in infrastructure and deal with the great constraints we face- climate change, carbon free energy and a sustainable world. We need to provide youth with opportunity to go to school, and opportunities to reinvent the world and how it works. We need a lot of investment. And we need to do some serious thinking. We can consider a long list of smart investments here. We have issues to deal with as serious as any national security issue we face. LINK
I leave you with a thought to consider. We have all seen the old Popular Science magazines talking about how computers are going to put us all on easy street... Well, easy street means not having a regular job. How do you get to easy street from here using technology? You go through a rocky stretch where some of the biggest problems are the inflexible minds of the people in charge to anticipate a new world and start working on the solutions to making it work for people.
Feel free to add your 2 cents below.