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We are just starting play with the wealth distribution data and will have much more coming your way. What we have seen so far is shocking.

The distribution of wealth has deteriorated significantly over the past 20 years and is now so skewed toward the top that average U.S. household wealth is close to $1 million, though the median household wealth is only around $70k.

In fact, the aggregate level of wealth of the bottom 50 percent peaked in Q1 2000, the height of the dot.com bubble, and is down almost 10 percent in nominal terms. Whereas, the aggregate wealth level of the top 1 percent is up almost 120 percent over the same period.

If I brought a number or a forecast like that to my manager when I was a very young economist working on the World Bank’s capital flows model back in the day, he would say,

“You are forecasting revolution.”

Note the relative leverage ratio of the bottom 50 percent. For several quarters after the GFC the bottom 50 percent, not all households but in aggregate, were technically insolvent, where debt levels were greater than the value of assets ( > 100 percent on the chart).

These data put the current political climate and debate around debt forgiveness in context. They also reflect the two-speed U.S. economy.

Stay tuned for some more shocking data.

Long pitchforks.

The Pivot Point

May 18, 2019

The Pivot Point

The massive economic shock following the banking collapse of 2007–8 is the direct cause of the crisis of confidence which is affecting almost all the institutions of western representative democracy. The banking collapse was not a natural event, like a tsunami. It was a direct result of man-made systems and artifices which permitted wealth to be generated and hoarded primarily through multiple financial transactions rather than by the actual production and sale of concrete goods, and which then disproportionately funnelled wealth to those engaged in the mechanics of the transactions.

It was a rotten system, bound to collapse. But unfortunately, it was a system in which the political elite were so financially bound that the consequences of collapse threatened their place in the social order. So collapse was prevented, by the use of the systems of government to effect the largest ever single event transfer of wealth from the poor to the rich in the course of human history. Politicians bailed out the bankers by using the bankers’ own systems, and even permitted the bankers to charge the public for administering their own bailout, and charge massive interest on the money they were giving to themselves. This method meant that the ordinary people did not immediately feel all the pain, but they certainly felt it over the following decade of austerity as the massive burden of public debt that had been loaded on the populace and simply handed to the bankers, crippled the public finances.

The mechanisms of state and corporate propaganda kicked in to ensure that the ordinary people were told that rather than having been robbed, they had been saved. In the ensuing decade the wealth disparity between rich and poor has ever widened, to the extent that this week the BBC announced the UK now has 151 billionaires, in a land where working people resort to foodbanks and millions of children are growing up in poverty.

…click on the above link to read the rest of the article…

Unrealistically Great Expectations

May 9, 2019

Unrealistically Great Expectations

Our expectations have continued ever higher even as the pie is shrinking..

Let’s see if we can tie together four social dynamics: the elite college admissions scandal, the decline in social mobility, the rising sense of entitlement and the unrealistically ‘great expectations’ of many Americans.

As many have noted, the nation’s financial and status rewards are increasingly flowing to the top 5%, what many call a winner-take-all or winner-take-most economy.

This is the primary source of widening wealth and income inequality: wealth and income are disproportionately accruing to the top slice of earners and owners of productive capital.

This concentration manifests in a broad-based decline in social mobility: it’s getting harder and harder to break into the narrow band (top 5%) who collects the lion’s share of the economy’s gains.

Historian Peter Turchin has identified the increasing burden of parasitic elites as one core cause of social and economic collapse. In Turchin’s reading, economies that can support a modest-sized class of parasitic elites buckle when the class of elites expecting a free pass to wealth and power expands faster than what the economy can support.

The same dynamic applies to productive elites: as I have often mentioned, graduating 1 millions STEM (science, technology, engineering, math) PhDs doesn’t magically guarantee 1 million jobs will be created for the graduates.

Such a costly and specialized education was once scarce, but now it’s relatively common, and this manifests in the tens of thousands of what I call academic ronin, i.e. PhDs without academic tenure or stable jobs in industry.

This glut is a global: I’ve known many people with PhDs from top universities in the developed world who have struggled to find a tenured professorship or a high-level research position anywhere in the world.

In other words, what was once a surefire ticket to status, security and superior pay is no longer surefire.

No wonder wealthy parents are so anxious to fast-track their non-superstar offspring by hook or by crook.

There is an even larger dynamic in play. As I explained here recently, the economic pie is shrinking, not just the pie of gains that can be distributed but the pie of opportunity.

Torches and Pitchforks

April 1, 2019

Torches and Pitchforks

The front page of our local paper struck a chord:

The subject of wealth inequality has been on my mind ever since I started writing Slope fourteen years ago. I’ve written countless posts on it, and even dedicated a SocialTrade page to it, but a quick summary of my disposition could be boiled down to a few personal points:

Although I didn’t know it at the time, my childhood was in an era of relative wealth equality in the United States, pretty much the most even playing field in its history;
Average folks like my Dad made $35,000 per year; the “rich” people in town made $50,000;
The houses of the average and the rich were pretty much the same, although the rich had Buicks instead of Fords and could afford maids who came to clean the house each day; but that was about it.

My own adulthood, of course, is like a different universe. Normal people live in $7 million houses. Rich people live in $25 million houses and have other residences scattered around the planet. The difference between rich and poor in my youth was a short hop; in my current life, it’s a chasm.

My view is that the increasing disparity between rich and poor has, for decades, largely been non-disruptive to society as a whole, principally because the lower classes have been placated enough, by way of the proverbial bread and circuses, not to cause any waves. Sure, there have been little movements here and there, such as Occupy Wall Street, but they have attracted fringe groups and fizzled out in weeks, if not days.

The aforementioned SocialTrade page is packed with charts like the one below, which shows just how hosed the lower classes are, but again, the rich are pretty much getting away with it with no consequence.

…click on the above link to read the rest of the article…

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

March 14, 2019

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

Via Shard Capital’s Bill Blain,

“Education is the most powerful weapon which you can use to change the world.. ”

In the headlines this morning: https://www.morningporridge.com/stuff-im-watching

So much stuff going on.. it’s shaping up to be a very interesting weekend.

But, let me start with a diversion…

There is a story of the Great Scottish King – Robert the Bruce. Having been defeated by the English multiple times, his family captured and executed, (or in the case of his daughter, left suspended in an open cage thru the winter), his army was scattered, the clans turned against him, on his own and without any support – he was on the verge of giving up. As he contemplated a bleak future, he watched a spider struggle to construct a web in the dank cave he was hiding in. The beastie failed again and again.. Finally, Bruce reached his decision. If the Spider succeeded, he would carry on.

He went on to become Scotland’s Greatest King.

Try, Try, Try again…? Perhaps Scotland will pull an unlikely win at Twickenham on Saturday? She-who-is-now-Mrs-Blain did warn me not to “bore everyone about Brexit…”, but needs must.

Even though a No-Deal Brexit is ruled out in the short-run, where do we go from here?

Or, perhaps, Theresa May is set to surprise us all. She really doesn’t know when to give up. The scuttlebutt round Westminster is she’s going to take her Brexit agreement back to the House for a third time – and is currently scaring the Rees-Moog loonies with the threat of a long extension leading to NO-Brexit and second referendum, and the Remoaners with the threat of a short-extension leading to No-Deal Brexit. At least 70 Labour MPs want to avoid a second referendum and could, perhaps, vote with her.

Of course, my above simplistic analysis ignores the EU.

…click on the above link to read the rest of the article…

We Don’t Need A New Deal: We Need A Whole New Deck

January 26, 2019

We Don’t Need A New Deal: We Need A Whole New Deck

The gap between the earth’s wardens of wealth and the nearly eight billion humans under their control has grown wider and more dangerous but is beginning to be understood by some as a systemic problem and not simply a matter of evil leaders and villainous followers. When people see and feel their futures ranging from problematic at best to non-existent at worst, we get the resultant turmoil and changes taking place in nations moving in many directions at once but all of them against established power over things as they are.

Whether votes are cast in elections labeled democratic though still under minority control, or issues are subject to mob rule of one extreme or another, they are producing governments at least rhetorically dedicated to change even if often dangerously confused or in merely cosmetic form. Nevertheless, those demanding change beyond simply continuing the rule of market forces under minority control are starting to move up and into more commanding roles in governments. Unfortunately, and especially in America, many still operate as though political change amounts to the candidates skin tone, religion or sex, neglecting the philosophy between their ears by concentrating more on the genitals between their thighs.

Thus we have working people going to the polls and electing representatives of wealth operating against their interest but rhetorically speaking of change, which may mean reverting to earlier forms of capital private profit which still leave the public good in poor condition, or worse, sinking into megalomaniacal rule under populists (?) promising to dump even more wrath on those at or near the bottom.

…click on the above link to read the rest of the article…

The Recession Will Be Unevenly Distributed

January 10, 2019

The Recession Will Be Unevenly Distributed

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper.

The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”

I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).

These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards are generated will be reaped by a few.

One aspect of the uneven distribution is that sectors that were relatively protected in recent recessions will finally feel the impact of this one. Large swaths of the tech sector (which is composed of dozens of different industries and services) that were devastated in the dot-com recession of 2000-02 came through the 2008-09 recession relatively unscathed.

This time it will be different. The build-out of mobile telephony merging with the web has been completed, social media has reached the stagnation phase of the S-Curve and many technologies that are widely promoted as around the corner are far from profitability.

Then there’s slumping global demand for mobile phones and other consumer items that require silicon (processors) and other tech components: autos, to name just one major end-user of electronics.

The net result will be mass layoffs globally across much of the tech sector.Research is nice but it doesn’t pay the bills today or quiet the restive shareholders as profits tank.

The public sector is also ripe for uneven distribution of recessionary impacts.Local government and its agencies in boomtowns such as the SF Bay Area, Seattle, Los Angeles, NYC, etc. have feasted on soaring tax revenues and multi-billion dollar municipal bonds.

…click on the above link to read the rest of the article…

What can we do?

December 18, 2018

What can we do?

Rainbow over the Tapajós River in the Amazon © Todd Southgate / Greenpeace

At the University of Minnesota Dr. Nate Hagens teaches an honours course called “Reality 101: A Survey of the Human Predicament.” Hagens operated his own hedge fund on Wall Street until he glimpsed, “a serious disconnect between capitalism, growth, and the natural world. Money did not appear to bring wealthy clients more well being.” Hagens became editor of The Oil Drum, and now sits on the Board of the Post Carbon Institute and the Institute for Integrated Economic Research.

Reality 101 addresses humanity’s toughest challenges: economic decline, inequality, pollution, biodiversity loss, and war. Students learn about systems ecology, neuroscience, and economics. “We ask hard questions,” says Hagens. “What is wealth? What are the limits to growth? We attempt to face our crises head on.”

Some students feel inspired to action, and some report finding the material “depressing.” One student shared the course material with a family member, who asked, “So what can I do?” The student struggled to answer this question, and the listener chastised her: “why did you explain all this to me, if you can’t tell me what to do?!”

A fair question. One that, as environmentalists, we often get asked. At the request of Dr Hagens, here is my list:

What can we do?

I have been asking this question all of my adult life. As I’ve witnessed the crisis intensify, I’ve experienced feelings of panic, anger, and helplessness. Nevertheless, I also feel at peace. I love my family and friends, I enjoy life in my community, and love my time in the natural world. Here are some of the ways I believe we can deal with anxiety about the world and take action:

…click on the above link to read the rest of the article…

The Big Picture

December 17, 2018

The Big Picture

Humanity has a lot of problems these days. Climate change, increasing economic inequality, crashing biodiversity, political polarization, and a global debt bubble are just a few of our worries. None of these trends can continue indefinitely without leading to a serious failure of our civilization’s ability to maintain itself. Taken together, these metastasizing problems suggest we are headed toward some kind of historic discontinuity.

Serious discontinuities tend to disrupt the timelines of all complex societies (another name for civilizations—that is, societies with cities, writing, money, and full-time division of labor). The ancient Roman, Egyptian, and Mayan civilizations all collapsed. Archaeologists, historians, and systems thinkers have spent decades seeking an explanation for this pattern of failure—a general unified theory of civilizational collapse, if you will. One of the most promising concepts that could serve as the basis for such a theory comes from resilience science, a branch of ecology (the study of the relationship between organisms and their environments).

Why Civilizations Collapse: The Adaptive Cycle

Ecosystems have been observed almost universally to repeatedly pass through four phases of the adaptive cycle: exploitation, conservation, release, and reorganization. Imagine, for example, a Ponderosa pine forest. Following a disturbance such as a fire (in which stored carbon is released into the environment), hardy and adaptable “pioneer” species of plants and small animals fill in open niches and reproduce rapidly.

This reorganization phase of the cycle soon transitions to an exploitation phase, in which those species that can take advantage of relationships with other species start to dominate. These relationships make the system more stable, but at the expense of diversity.

…click on the above link to read the rest of the article…

Tomgram: Nomi Prins, A World That Is the Property of the 1%

December 13, 2018

Tomgram: Nomi Prins, A World That Is the Property of the 1%

This year, I simply couldn’t get one fact out of my head: according to a 2017 report from the Institute for Policy Studies, three billionaires — Jeff Bezos, Warren Buffet, and Bill Gates — have amassed as much wealth as the bottom half of American society. That’s 160 million people! (And unlike our president, I don’t use exclamation points lightly or often.) Or as Oxfam reported in January of this year, the wealth of eight men — and yes, they were men (including the three mentioned above) — was equal to that of half the people on this planet in 2017. Yikes! And just to give you a sense of where we’ve been heading at supersonic speed, an Oxfam report a year earlier had 62 billionaires owning half the planet’s wealth. Imagine that: 62 to eight in a single year.

Then consider what we know about the rise of the billionaire class. Again, according to Oxfam, a new billionaire appeared every two days in 2017, while 82% of the wealth being created on this planet already went to the top 1% and the bottom half of the global population saw no wealth gains at all. In 2017 (the last year for which we have such figures), the total wealth of the globe’s billionaire class ballooned by almost 20%. (And I want you to know that, unlike our president, I’m fighting hard to restrain the urge to put one or more exclamation points after every one of those sentences.)

Oxfam released its figures this January to coincide with the annual meeting of the world’s top dogs at Davos in Switzerland. Assumedly, it will do so again in January 2019 and I shudder to think what the next set of stats are likely to be. In the meantime, consider what TomDispatch regular Nomi Prins, author most recently of Collusion:…

…click on the above link to read the rest of the article…

Breaking the Chains of Debt: Lessons from Babylonia for Today’s Student Crisis

November 26, 2018

An economy that does not grow?

November 14, 2018

An economy that does not grow?

There is now plenty of evidence that economic growth is highly problematic for human welfare and survival. The evidence comes from three domains. 1) The ecological: continual growth uses up the resources that supply and the sinks that take the waste from human activity globally. 2) The social: economic growth does not correlate well with human welfare and its supposed benefits, rather than being shared, become ever more concentrated at the top of the wealth and income pyramid. 3) The economic: economic systems that rely on perpetual growth are inherently unstable, and meet internal and external constraints (or contradictions) that undermine them.

While it may be clear that the wager on endless growth is a bad one, a more difficult question arises: “what would be the characteristics of an economy that does not grow?”.

In his book “Macroeconomics Without Growth¹” Steffen Lange attempts to construct a framework for answering this question, rooted in the three main approaches to theorising the economy, hence the subtitle: “Sustainable Economies in Neoclassical, Keynesian and Marxian Theories”. The book is a valuable contribution to the theory and practice of degrowth and provides a solid grounding for interventions in the policy arena, including those by political parties that seek to construct a coherent alternative, rather than a mishmash wish list of proposals. A strength of the book is its rigorous, formal analysis of the main theoretical approaches and what they say about the preconditions for growth, and the possibilities of zero growth.

As such the book extends to 583 pages, and the detail, with recourse to mathematical formulae to capture the various models and sub-models, will mean that many will not read it. The aim of this essay review, then, is to summarise the book, emphasising the synthesis reached by Lange, and suggesting a few issues that arise.

In search of the macroeconomics of post-growth.

…click on the above link to read the rest of the article…

The SDGs: Transforming our World or Business as Usual?

November 9, 2018

The SDGs: Transforming our World or Business as Usual?

Compared to their predecessors, the Millennium Development Goals, the Sustainable Development Goals (SDGs) are a step in the right direction: With their global validity, they acknowledge that change not only needs to happen in poor countries, but in rich countries too, see for example Goals 11-15 (Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life below Water and Life on Land). In all these areas the early industrialised countries of the Global North have a lot of homework to do to bring their lifestyles and economies within the planetary boundaries.

However, considering the large ecological debts of the Global North and the related structural inequalities of power and wealth, it can be doubted that a one-fits-all solution such as the SDGs helps bridge the existing extreme inequalities between countries. They don’t include enough political commitments to acknowledge and further reduce these inequalities.

If the countries of the South were truly to achieve Goals 1-9 (No Poverty, Zero Hunger, Good Health and Well-Being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Industry Innovation and Infrastructure), the physical reality of our planet would require all early industrialized countries to significantly cut back their consumption of natural resources, their Greenhouse Gas emissions and other types of waste at an unprecedented pace. Some critics even go as far as saying: “Forget ‘developing’ poor countries, it’s time to ‘de-develop’ rich countries”. In addition to the obligation for Northern countries to clean up their own act, cash transfer to the South, be it called development assistance or not, is an acknowledged means to pay back some of the ecological debts. It seems, however, that in total more money flows from developing countries to the West than the other way round. Anthropologist Jason Hickel takes the following conclusion from this.

…click on the above link to read the rest of the article…

UBS Warns Trump’s Trade Fights Are ‘Reversing 15-Years Of Global Progress’

October 25, 2018

UBS Warns Trump’s Trade Fights Are ‘Reversing 15-Years Of Global Progress’

Protectionism has cross-party support in the U.S., and nationalist parties continue to gain traction in Europe. Where there is inequality, there is a surge in protectionism; a risk that could trigger the next global economic crisis sometime around 2020.

The Trump administration’s trade war and a hard Brexit could send tariffs to levels not seen in 15 years, according to UBS economist, as per Market Watch.

The Swiss bank views the U.S. tariffs, along with retaliatory measures (tit-for-tat with China), as the most significant factors boosting the metric. Second, are fears of a hard Brexit, which refers to the potential split between the U.K. and the European Union.

“Combined, these two would add 142 [basis points] to the average global import tariff, essentially reversing 15 years of progress in global tariff reduction,” said UBS chief economist, Arend Kapteyn, in a recent note.

The first chart shows how the U.S. significantly outpaces the U.K. in the bank’s report of “which tariff wall if bigger.” In other words, the next global economic crisis could be triggered by President Trump’s trade war.

The next chart reveals how the average global tariff could skyrocket to levels not seen since the early days of George W. Bush’s first presidential term.

Kapteyn then warns that trade wars and a hard Brexit could be the perfect cocktail to stymie global growth. “We wanted to give some sense of the jump in trade disruptions.”

* * *

BofA’s Michael Hartnett sings a similar tune of the coming turmoil. He warns U.S. fiscal easing and protectionism late in the economic cycle could cause trouble.

In the chart below, controls on trade, capital, and labor are likely to soar to levels not seen since the 1940s, effectively wiping out more than a half-century of progress under globalism.

…click on the above link to read the rest of the article…

Has America Become a Dictatorship Disguised as a Democracy?

October 24, 2018

Has America Become a Dictatorship Disguised as a Democracy?

Still from “They Live.”

“The poor and the underclass are growing. Racial justice and human rights are nonexistent. They have created a repressive society and we are their unwitting accomplices. Their intention to rule rests with the annihilation of consciousness. We have been lulled into a trance. They have made us indifferent to ourselves, to others. We are focused only on our own gain.”

—They Live, John Carpenter

We’re living in two worlds, you and I.

There’s the world we see (or are made to see) and then there’s the one we sense (and occasionally catch a glimpse of), the latter of which is a far cry from the propaganda-driven reality manufactured by the government and its corporate sponsors, including the media.

Indeed, what most Americans perceive as life in America—privileged, progressive and free—is a far cry from reality, where economic inequality is growing, real agendas and real power are buried beneath layers of Orwellian doublespeak and corporate obfuscation, and “freedom,” such that it is, is meted out in small, legalistic doses by militarized police armed to the teeth.

All is not as it seems.

“You see them on the street. You watch them on TV. You might even vote for one this fall. You think they’re people just like you. You’re wrong. Dead wrong.”

This is the premise of John Carpenter’s film They Live, which was released 30 years ago in November 1988 and remains unnervingly, chillingly appropriate for our modern age.

Best known for his horror film Halloween, which assumes that there is a form of evil so dark that it can’t be killed, Carpenter’s larger body of work is infused with a strong anti-authoritarian, anti-establishment, laconic bent that speaks to the filmmaker’s concerns about the unraveling of our society, particularly our government.

…click on the above link to read the rest of the article…

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