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Push Them Hard Enough and the Productive Class Will Opt Out of Servitude
Push Them Hard Enough and the Productive Class Will Opt Out of Servitude
People love their big paychecks, but they also value their sanity.
One of the most astonishing manifestations of disconnected-from-reality hubris is public authorities’ sublime confidence that employers and entrepreneurs will continue starting and operating enterprises no matter how difficult and costly it becomes to keep the doors open, much less net a profit.
The average employee / state dependent reckons that the small business owner / entrepreneur is killing it financially, banking a small fortune in pure profit every month, and that they’re doing what they love so they’ll continue doing it no matter what. In other words, they’re all wealthy Tax Donkeys who can easily afford higher taxes and fees and will tolerate paying more to keep doing what they love.
Wrong on both counts–dead wrong. A far more typical response is the one a house painter emailed me last year: every day, he reported, he wanted to dump his spray rig and power washer in a dumpster and leave the U.S.
The number of small businesses and entrepreneurs hanging on by a thread financially and emotionally is legion. Rather than killing it, they’re getting killed by rising rents, wages, labor overhead, taxes, fees, licensing, inspection fees, insurance and so on.
The long hours, financial risks and open-ended responsibilities are ideal conditions for burn-out and bankruptcy.
My partner and I had a ready response when employees hinted that we must be raking in big bucks: here’s the keys to the front door, payday is on Friday.
That shut them up in short order because they could see we meant it: it’s all yours, including meeting payroll in a bad month out of your own pocket.
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How Empires Fall: Moral Decay
How Empires Fall: Moral Decay
There is a name for this institutionalized, commoditized fraud: moral decay.
Moral decay is an interesting phenomenon: we spot it easily in our partisan-politics opponents and BAU (business as usual) government/private-sector dealings (are those $3,000 Pentagon hammers now $5,000 each or $10,000 each? It’s hard to keep current…), and we’re suitably indignant when non-partisan corruption is discovered in supposed meritocracies such as the college admissions process.
But we’re less adept, it seems, at discerning systemic moral decay, which infects the very foundations of the economy and society.
Consider America’s favorite pastime, corrosive partisan politics. This distemper is often traced back to (surprise!) extreme partisans, but as the chart below shows, political partisanship has risen in near-perfect correlation with wealth-income inequality, which it itself the hallmark of deeply systemic corruption, as the system is rigged to benefit the few at the expense of the many. (Chart courtesy of Slope of Hope.)
There’s a phrase that describes a socio-economic system becoming the means for personal aggrandizement at the expense of civil society itself: moral decay.How else can we describe a system whose inputs and processes are rigged so the output is the vast majority of all income gains flow to the top 0.1%? (See chart below.)
When a socio-economic system institutionalizes the extralegal privileges of wealth and power, that is moral decay. When government only responds in ways that first serve the interests of entrenched insiders, that is moral decay. When the financial system is rigged to sluice income and wealth to the top of the wealth-power pyramid while stripmining the productive class below via inflation and taxes, that’s moral decay. (See chart below of workers’ share of the national income.)
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The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different
The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different
Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector.
Financial crises come in two flavors: fraud and credit-valuation over-reach.
Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they’re supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone’s getting rich, and so on.
The resolution has to 1) eliminate the perverse incentives that fueled the crisis; 2) institutionalize oversight that actually functions to limit dangerous excesses and 3) all the malinvestment / bad debt must be liquidated and the losses taken / distributed.
Correspondent David E. recently sent me this insightful outline of how the Texas Savings & Loan financial crisis arose and was slowly and painfully resolved in the 1980s:
“The S&L crisis provides an excellent example of both how to make a problem worse and how to resolve it in the end. (note: I watched this play out in Texas; some of your readers may have a different perspective).1. Prior to the mid-1970s, S&Ls lived by the 3-6-3 rule – pay depositors 3%; make home loans at 6%; and be on the golf course at 3 o’clock. This cozy little world had been in place since the 1950s.2. Inflation in the 70s wrecked this calculation. The loans (long term home mortgages) still paid 6%, but the S&L’s were having to pay the depositors more – often more than the 6% they were making on the loans. Bankruptcy loomed.
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Fitness without the Long, Grueling Workout
Fitness without the Long, Grueling Workout
Pondering what Nature selected as advantageous in our long existence as hunter-gatherers helps us understand why walking and occasional short bursts of intensive exercise together yield the vast majority of the benefits of exercise/fitness.
What if there was a way to get rich by merely investing a modest amount of money weekly? Who wouldn’t want to join the program? Our health is our only real wealth, and fitness is like the modest investment that yields multiples of the investment made.
Since our culture is based on commerce and marketing, extreme sports are front and center: professional athletes, daredevils performing insanely dangerous stunts, oldsters running marathons, and so on.
The subtext of this media coverage implies that athletics and fitness are unattainable by us average people who have neither the time nor inclination to pursue extreme training.
This media glorification leaves a lot of decidedly unglorious reality out of the picture. Extreme training often leads to extreme injuries–but you won’t see any injuries except in carefully edited stories in which an extreme athlete recovers from a horrendous accident by sheer willpower and arduous training.
Left out are those who don’t recover despite their willpower and arduous training.
Scientific research is giving us a much more realistic, practical and attainable understanding of increasing and maintaining a level of fitness that yields tremendous health benefits with relatively modest effort.
As discussed in a previous blog post (The “Miracle Cure”: Walking), we’re selected/engineered to walk, and so the simple inclusion of walking in our lives yields enormous benefits in everything from mental health, lowering our risk of dementia, strenghening our immune response and so on.
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Assange and the Unforgivable Sin of Disemboweling Official Narratives
Assange and the Unforgivable Sin of Disemboweling Official Narratives
The entire global status quo is on the cusp of the S-Curve decline phase.
There is really only one unforgivable sin in the political realm, and that’s destroying the official narrative by revealing the facts of the matter. This is why whistleblowers who make public the secret machinery of the elaborately artful lies underpinning all official narratives are hounded to the ends of the Earth.
Employees of state entities such as Ellsberg, Manning and Snowden are bound by vows of secrecy and threatened by the promise of severe punishment.Outsiders such as Assange are even further beyond the pale because they can’t be accused of being traitors, as they never took the vows of secrecy required by the Deep State.
The single most damaging revelation to all the elaborate lies that make up official narratives is the truth revealed in official emails, documents and conversations. This is why virtually every document and correspondence is now “classified,” so anyone releasing even a mundane scrap can be sentenced to rot in federal prison.
In a recent C-SPAN interview, author Nomi Prins explained the incredible difficulty of accessing papers in presidential libraries now due to virtually everything being classified. Freedom of Information Act (FOIA) applications must be filed, and researchers must wait years to gain access to routine correspondence that was freely available to all a decade or so ago.
Official paranoia has a 100% correlation with the amount of damage done to official narratives by any leaks of the facts of the matter. What are they so afraid of? Here’s the dynamic in play: the more fragile the narrative, the greater the dependence on half-truths and lies, the greater the official urgency to crush all whistleblowers and maintain a Stasi-like vigilance against any murmurs of dissent or doubt.
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Beneath the Surface of Brexit
Beneath the Surface of Brexit
Geography matters, the balance of power matters, and democracy–it’s not yet clear if democracy matters or not.
I’ve been asked to comment on Brexit. I’m happy to do so, but not by promoting a position yes or no, or by attempting to unravel the political machinations, as I have neither the knowledge nor the interest to do so.
What I can do is propose two beneath the surface contexts which might be useful in understanding what’s really going on. These are the impressions and opinions of a distant observer, someone who is neither an expert nor a resident of the United Kingdom / Great Britain.
It seems to me that geography is still salient. As an island sea power, England is close enough to the continental land-based powers of Europe to fear invasion or continental hegemony but independent enough to not rely too completely on continental European powers.
This is not just a consequence of its temperate weather (thanks to the Gulf Stream) or being an island; the historical reliance on sea power places it in the same general category as the other historic blue-water sea-power-based European nations: The Netherlands, Spain, Portugal, Denmark and Sweden.
These sea-power nations projected power and secured trading rights and colonies by controlling the seas and access points to interior lands, the so-called Rimlands.
Continental powers such as Russia, France and Germany have at various times made formidable attempts to create rival blue-water navies, but in each case the British or American fleets eventually limited these claims to dual power bases (both land and sea-based power).
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The Japanification of the World
The Japanification of the World
Zombification / Japanification is not success; it is only the last desperate defense of a failing, brittle status quo by doing more of what’s failed.
A recent theme in the financial media is the Japanification of Europe.Japanification refers to a set of economic and financial conditions that have come to characterize Japan’s economy over the past 28 years: persistent stagnation and deflation, a low-growth and low-inflation economy, very loose monetary policy, a central bank that is actively monetizing debt, i.e. creating currency out of thin air to buy government debt and a government which funds “bridges to nowhere” and other stimulus spending to keep the economy from crashing into outright contraction.
The parallels with Europe are obvious, but they don’t stop there: the entire world is veering into a zombified financial, economic, social and political status quo that is the core of Japanification.
While most commentators focus on the economic characteristics of Japanification, social and political stagnation are equally consequential. If we only measure economic/financial stagnation, it appears as if Japan and Europe are holding their own, i.e.maintaining the status quo via near-zero growth and near-zero interest rates.
But if we measure social and political decay, the erosion is undeniable. Here’s one example. Few Americans have access to or watch Japanese TV, so they are unaware of the emergence of the homeless as a permanent feature of urban Japan. The central state propaganda media is focused on encouraging tourism, a rare bright spot in Japan’s moribund economy, and so you won’t find much media coverage of homelessness or other systemic signs of social breakdown.
If you watch Japanese detective / police procedural dramas, however, you’ll find constant references to homeless people and homeless encampments: detectives seek witnesses to a crime in the nearby homeless encampment; a homeless man living in an abandoned warehouse is found murdered, etc.
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Dear Stock Market: You Can’t Have It Both Ways
Dear Stock Market: You Can’t Have It Both Ways
Eventually reality will intrude in this pleasant madness.
OK, let me see if I have this right: the stock market is soaring because the economy is softening, so the Federal Reserve panicked and went from raising rates to considering cutting rates.
It seems markets are now assuming a rate cut is already locked in, given the Fed’s commitment to cease trimming its balance sheet by September.
This dovish reversal means liquidity is flooding back into stocks and bonds, and so stocks are rising as once again “the Fed has our backs.”
OK, I get it. But the market is also rising because punters and pundits are assuming the soft spot in economic expansion has ended, and growth is already resuming globally. The positive data out of China is taken as proof-positive of this resumption of expansion.
Now wait a minute–the market is rising because growth is softening and also because growth has resumed? Sorry Stock Market, you can’t have it both ways. Either the global economy is stagnating, forcing central banks to flood the financial system with more liquidity, or growth is resuming, in which case raising interest rates are back on the table, especially if wage inflation kicks in.
If growth resumes, not only will the Fed have a green light to raise rates, it will also face pressure to resume trimming its bloated balance sheet.
Many observers have noted that the sharp decline in Treasury bond yields is signaling fear that the global economy is recessionary, and central bank goosing isn’t going to reverse the slowdown. Meanwhile, stocks are schizophrenic: going up because growth is slowing and Fed rate cuts are now in the bag and going up because growth has resumed.
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The Media, Mueller, the Big Con and the Democratization of Narrative
The Media, Mueller, the Big Con and the Democratization of Narrative
Falling for a con is painful. The first reaction is to deny being conned, of course. The second is to blame skeptics for being correct in their skepticism.
Here’s the fundamental “story” of the Mueller Investigation: elites don’t like “the little people” democratizing public narratives. The elites–who reckon theirright to rule is self-evident–want to set the narrative and the context, because that’s the foundation of power: once you get the citizenry to agree on your narrative and context, you secure two valuable things: 1) political legitimacy and 2) their obedience.
Elite anxiety over the “the little people” democratizing narratives is not a new phenomenon. Elites have demanded control of any media outlet that doesn’t parrot their line and have tried to declare skeptical inquiry sedition for generations, stretching back to the founding of the Republic.
The elite interest in controlling the narrative and context long predates the era of “fake news.” Please read this excerpt from the 1991 book The Radicalism of the American Revolution about the democratization of everyday life in post-Revolutionary War America (1790 – 1830):
“The result of all these assaults on elite opinion and celebrations of common ordinary judgment was a dispersion of authority and ultimately a diffusion of truth itself to a degree the world had never seen. With every ordinary person being told his ideas and tastes, on everything from medicine to art to government, were as good as, if not better than, those of “connoisseurs” and “speculative men” who had college degrees, it is not surprising that truth and knowledge became elusive and difficult to pin down.”
This democratization deeply unsettled the elites, who were accustomed to leading by setting the “acceptable” narrative and context. Democracy, they discovered to their chagrin, isn’t a force that one can bottle up and dispense in measured doses around election time; it spreads throughout every sphere of the society.
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Politics Has Failed, Now Central Banks Are Failing
Politics Has Failed, Now Central Banks Are Failing
With each passing day, we get closer to the shift in the tide that will sweep away this self-serving delusion of the ruling elites like a crumbling sand castle.
Those living in revolutionary times are rarely aware of the tumult ahead: in 1766, a mere decade before the Declaration of Independence, virtually no one was calling for American independence. Indeed, in 1771, a mere 5 years before the rebellion was declared, the voices promoting independence were few and far between.
The shift from a pre-revolutionary era to a revolutionary era took less than a year. Perhaps no one exemplified the rapidity and totality of radicalization more than Benjamin Franklin, who went from an avowed Loyalist bent on reform to a dedicated, zealous revolutionary at the tender age of 70. (Old dogs can learn new tricks, at least in revolutionary eras.)
Recall that news could only travel as fast as a ship between seaports or a horse on the colonies’ minimalist roads, and it took days to travel between Boston, Philadelphia and New York, and much longer to reach Williamsburg and Charleston and points west. Communications were slow and limited, and this makes the rapid change of the political tide even more extraordinary.
Are we in a pre-revolutionary era? Here’s clue #1: politics has failed. When the political process can no longer fix what’s broken, politics has failed. When entire classes of citizenry no longer feel represented, politics has failed. When the system delivers a steadily declining standard of living to the bottom 80% of households, politics has failed.
Clue #2: having failed, the political machinery passed the baton to the central bank, which attempted to fix what’s broken by creating money out of thin air.
…click on the above link to read the rest of the article…
Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?
Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?
Adaptability and flexibility will be the core survival traits going forward.
What will separate the many nations that will crumble in the next 25 years and those few that will survive and even prosper while the status quo dissolves around them? As I explain in my recent book Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic, the factors that will matter are not necessarily cultural or financial; being hard-working and wealthy won’t be enough to save nations from coming apart at the seams.
Here are the factors that will matter in the next 25 years:
1. The ability to engage and survive non-linear change, which is rapid, unpredictable and systemic, as opposed to linear change which is gradual, predictable and limited in nature.
None of the current political systems are decentralized enough and adaptable enough to survive the non-linear era we’re entering. As I explained in What If Politics Can’t Fix What’s Broken?, the politics of centralized compromise and incremental, top-down adjustments are wholly inadequate to dealing with non-linear disruptions.
2. The nations that cannot jettison their parasitic elites will fall; the few that find the political will to jettison their parasitic elites will have the wherewithal to survive and possibly even prosper as the global status quo collapses around them.
The problem, as we all know, is the parasitic elites rule the centralized hierarchies of wealth and political power, and they will cling to power even as the nation they rule crumbles around them. The hubris, complacency and greed of the ruling parasitic elites is near-infinite; the idea that the political and financial structures that they dominate will not survive simply doesn’t exist in the parasitic elites, with the exception of a few outliers who are constructing remote bugout compounds with landing strips etc.
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The Neutered Fed Is Politically Trapped
The Neutered Fed Is Politically Trapped
Everyone now knows that the only meaningful goal of Fed policy is propping up the world’s greatest credit-asset bubble.
In this era of fake news and deep-fake digital recordings and images, it’s important to use unedited images. With this firmly in mind, here is an unedited photo of Federal Reserve Chair Jay Powell and former Fed Chairs Janet Yellen and Ben Bernanke from their recent unprecedented appearance on 60 Minutes:
The purpose of the Fed chiefs’ dog-and-pony show was to promote the notion that the Fed really really really (try not to laugh out loud) “cares” about the average American, even though 85% of the $30 trillion in gains generated by the Fed’s policies flowed to the top 10% and roughly two-thirds of the gains flowed to the top few percent.
The bottom 80% got essentially nothing except a drastic reduction in the purchasing power of their stagnating wages. If this is how the Fed “cares” about average Americans, I wonder what they’d do if they chose to impoverish average Americans. Oh wait a minute, they already did.
I’ve covered this in recent essays:
The Fed’s “Wealth Effect” Has Enriched the Haves at the Expense of the Young
It’s All About Who Reaps the Gains (Asset Bubbles) and Who Eats the Losses (Stagnating Wages)
What triggered the unprecedented propaganda-fest of the three Fed monkeys? The realization that the Fed is evil is seeping into public awareness, and the Fed honchos are awakening to the reality I’ve spoken to here many times: the Fed is now constrained politically in terms of how far it can go to bail out the banks and the super-wealthy again.
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While the Nation Fragments Socially, the Financial Aristocracy Rules Unimpeded
While the Nation Fragments Socially, the Financial Aristocracy Rules Unimpeded
America’s aristocracy is not formalized, and that’s the secret of its success.
If there is one central irony in American history, it is this: the citizenry that broke free of the chains of British Monarchy, the citizenry that reckoned everyone was equal before the law, the citizenry that vowed never to be ruled by an aristocracy that controlled the government and finance as a means of self-enrichment, is now so distracted by social fragmentation that the citizenry is blind to their servitude to a new and formidably informal financial aristocracy.
From this juncture, ironies abound: the so-called Socialist demands for Medicare for All, “free” college for all and Universal Basic Income (UBI) are encouraged (or perhaps orchestrated) by the financial aristocracy, which rakes in tens of billions of dollars in profits from its banking, healthcare, national defense and higher education cartels: throwing more trillions down the ratholes of Medicare and higher education will only further enrich and empower the financial elites.
As for Universal Basic Income (UBI), the financial aristocracy is cheering loudly for UBI, which would enable debt-serfs to keep servicing their debts. (Is anyone so naive to think that UBI won’t have a clause which enables the deduction of debt payments from the monthly “free money”? Does anyone think the financial aristocracy is going to give $1,000 a month to debt-serfs and then let them default on their debt? Get real!)
The demands for social justice, i.e. that everyone be allowed to be treated the same before the law and enjoy the same rights as other citizens, is a core tenet of American culture. Long before the Constitution was even ratified, the calls to end slavery were becoming louder.
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Here’s The Problem: The Pie Is Shrinking
Here’s The Problem: The Pie Is Shrinking
At that point, the only way to enable debt-serfs to service their debts is too give them free money, i.e. Universal Basic Income (UBI).
Scrape away the churn and distraction and the problem is simple: the pie of prosperity is shrinking, and the “fixes” are failing. The status quo arrangement is based on the endless expansion of “growth” and debt, which is the monetary fuel of more, more, more of everything: money, energy, resources, goods, services, jobs, wealth and income, all of which make up the elixir of prosperity.
Prosperity is shorthand for a positive return on investment (ROI), a.k.a. primary surplus. Prosperity is the result of there being a surplus which can be distributed after capital, resources and labor are put to work.
The higher the return on investment, the more surplus there is to distribute.When the surplus is bountiful, there’s enough to go around for everyone to feel that life is getting better.
But all systems eventually track an S-Curve of rapid growth, maturation and depletion/decline, and surpluses diminish: the pie stops expanding and starts shrinking. There’s less to go around, and suddenly the political squabbling intensifies as every elite and every constituency seeks to preserve their slice of the pie at the expense of others.
This means shifting the losses of purchasing power and prosperity onto others without appearing to do so. Openly ripping a slice from the grasping hands of another elite or constituency will launch a protracted political battle, as every group will fight to the death to keep its share untouched.
By far the best ways to shift the losses to others are 1) inflation (reducing the purchasing power of their income) and 2) creating phantom wealth that can be used to buy up all the income-producing assets. Unsurprisingly, this is precisely what we see happening globally.
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The Source of Killer Inflation: Services
The Source of Killer Inflation: Services
The soaring cost of services is driven by a number of factors.
What will the future bring: fire (inflation) or ice (deflation)? The short answer: both, but in very different doses. Goods that are tradeable and exposed to technologically driven commodification will decline in price (deflation) while untradeableservices that are difficult to commoditize will increase in price (inflation), generating a self-reinforcing feedback loop of wage-price inflation.
Gordon Long and I discuss these trends in our latest program The Supply-Demand Services Problem (YouTube).
The big difference between goods that drop in price (TVs, etc.) and services that are exploding higher (healthcare, childcare, elderly care, higher education, local taxes and fees, etc.) is the relative size each occupies in the household budget: a new TV is a couple hundred bucks and a once-every-few-years purchase, while all the services cost thousands of dollars annually– or even tens of thousands of dollars.
A new TV or electronic gew-gaw is signal noise in the household budget while services consume the most of what’s left after paying for housing and transport.
A 10% decline in the cost of a new TV is $25, while a 10% increase in annual tuition and college fees is $2,500. Add in thousands more for childcare, elderly care, local taxes and fees and healthcare, and the deflationary impact of tradeable goods is trivial compared to the increases in untradeable services.
Not all goods are declining in sticker price. vehicles are rising sharply in price, a fact that’s erased by hedonic adjustments in official inflation (the new car is supposedly so much better than the previous model that the “price” actually declines-heh).
Then there’s the inexorable shrinkage of quantity and quality. The package that once held 16 ounces now contains 13.4 ounces, and the appliance that once lasted for years now lasts a few months as the quality of components is reduced.
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