The Will to Believe and Our Unconscious Disconnect with Facts
27 October 2016 | Pago Pago, American Samoa
We all imagine we are reasonable and adequately informed, but the truth is most Americans cannot unemotionally deal with factual issues in a reasonable and discerning way. They are unable and unfit to do so.
We jumble things up and, being untrained in critical thought and debate, have poor and undeveloped memories and strong imaginations which allow us to think and believe too largely what we want. Compounding the problem is our lack of background knowledge and quality educations. As Nietzsche explained, our conscious minds too often and best yield up make-believe and flights of fancy. The province of Hollywood.
How else can such disparate views be held on narrow issues among otherwise nominally reasonable people? A further answer is much mis and dis-information abounds around us derived from nominally authoritative sources, intentionally placed there by special interests and unscreened by a media that lacks adequate educations and discernment. This seriously compounds the situation and undermines true expert authority. Pick-and-chose-your-facts results ensue. This compounding of the problem cannot be overemphasized. American minds are to ill-equipped and too undeveloped to parse though the resulting sludge and discern truth. Emotionalism and nostalgia are further overlays that compound the problem of a lack of good capacity for factual discernment and policy understanding. As educational standards slip, these problems for rational thought ascend.
Democracy has become haywired. Americans battle with each other over issues that at base require factual discernment and often special training or knowledge both of which they conspicuously lack. If geographic lines were more neatly and clearly demarked, this could be the stuff of a future civil war. As it is, we have endless and foolish shouting matches between leaders and between lay people alike. Garbled thinking triumphs even among the better educated.
Our prospects are in fact dismal for these reasons.
Our Willful Economic Blind Side
27 October 2016 | Pago Pago, American Samoa
The problem is acute. Even liberals quash discussion of it and, like our media, hide these problem statistically in grossly misleading averages. These are not largely questions of economic judgment and focused emphasis. They are core overlooked or deliberately slighted issues that are hammering us. We just cannot come to grips with these issues. The media and body politic are suppressed and only sense these issues but not their economic implications, including stymied growth and an economy that only serves the top end and its paid minions,
Unlike others, many of whom follow every market twitch and their predictions and think that is the US economy, I am personally stuck on the following taboo issues which I think are our core problems:
1) income hoarding by the rich and super rich -- that is, money in the form of income removed from the flow against goods and services in commerce, and the resulting liquidity trap we are in (with an extreme preference for asset liquidity above all by the rich and super rich -- precluding much current real investment and consumption), with its consequences for the Fed and our secondary financial markets -- an unconscious hijacking of the economy by the rich and super rich, a problem only possible with excessive income inequality. Our new "lower low" results with stagnant growth.
2) hugely excessive income and wealth inequality and its consequences for many Americans and our damaged economy referenced above (partly described above), and
3) the dessimation of the core of our middle class with 90 plus million Americans now not in the labor force and middle class wealth substantially destroyed due to too many homes lost in recent years, many by banking frauds (e.g., foreclosures by non- title holders). Many in the middle class have sunk into the lower class. But if we kept track of the middle class by people's names and with their financial statements from the 1990s, we would see the disaster that has happened.
So how bad is the hoarding problem?. Those hoarding huge sums are corporations and the rich and wealthy who control them. The top 50 U.S. companies hold $1.4 trillion just in cash. Total corporate hoarding of cash is estimated to be 2.5 trillion and that doesn't include near cash or personal hoarding by the rich and wealthy. Much of the increase in the stock and bond secondary markets is their hoarding plus cash saved in banks, a small portion of which gets loaned out for real investment but later, with delays. Just world billionaires are hoarding $1.7 trillion and that is just in cash only and the US has over half of them. Total mostly cash hoarding is on par I suspect with total QE and open market operations toward the same end probably about $5 trillion mostly in cash for the same period and much more if we include much of the increases in stock and bond secondary market prices as near cash. People don't understand the scope of the problem.
Clearly mega bucks are involved, but most think just cash can be hoarded and that is not true. What is hoarded of current income is that which is not spent on current consumption and current real investment and those hoards build up over time as part of accumulated wealth so I suspect my educated guesses are mostly for just cash recently. Value that can be quickly liquidated to cash should be included as well and would more than triple these figures.
Because so few understand Keynes, as I have explained him, useful data are not gathered. One way, however, of estimating current hoarding would be to go the other way and do an econometric estimate of the following sum: national income - current consumption - current real investment - net exports or Y - C - I - NE. Work for some enterprising economist..
The silence and silencing on these points of discussion in the media, including in the social media, in the political area and in America somewhat generally, as well of course in public policy discussions is I think is an outrage. Many affirmatively work to cover up and deemphasize these problems in order to deny them. They are the handmaidens of the status quo and the oligarchy.
Our income and wealth inequality is known and is massive and out of control, The top 10 percent of Americans get almost 50 % of all national income and now have almost 75% of all wealth in the country. The top 1% get 22% of all national income, double the 11% that the bottom 50% of all income recipients get. Only the rich and wealthy can afford to hoard income and that is a mega problem tightly connected to problem 1) above.
As a nation, we are politically and emotionally unable to face, much less address these problems. We are being schooled in denial and taught to do nothing by the controlled system in which we live. We have no policies or remedies at present and and so are consigned to be a less than happy nation and to our new "lower low" of growth, all relative of course were we would be but for these problems. A point deniers simply refuse to understand.
Further Blowback on Corruption in the Academy
23 October 2016 | Pago Pago, American Samoa
Academic freedom is too largely a thing of the past. It is well know that research agendas and permitted teaching syllabi are substantially dictated by big dollar corporate research sponsors in the areas of economics and business studies. The intrusion is well developed and substantial. It has a long and early history as well.
I once asked an MIT professor whom I had hired for an antitrust case in the late 1970's why no top US economics department had a single tenured Marxist on its faculty, noting most top European economic faculties typically had several. He responded without hesitation that US corporate research sponsors would not tolerate that for a heartbeat. Not unsurprisingly, it took a European economist, Thomas Piketty, a specialist on income inequality and wealth, to give us "Capital in the Twenty-First Century," catching most American economists with their pants down, much like the 2007 housing and financial crash did. Hostility and embarrassment ensued. Excuses were made.
Too much is off limits. Too much is out-come controlled. As Harvard professor Lawrence Lessig explained in the Berlin lectures given, fittingly enough, at the University of Chicago a couple of years ago, such faculties of the Academy have become corrupted by the money provided by their controlling research sponsors, a contention greeted with anger and dismay by Chicago's faculty, but with enthusiasm by its graduate student body. Toe the line compliance and hierarchical obedience is mandatory. Kudos go to young faculty who best understand these matters and promote the orthodoxies, with theoretical and technical innovation.
But the problem has spread. It now reaches well beyond economics departments and business schools and deeply into the humanities and sciences as well. Agendas are imposed and efforts are largely controlled by internal hierarchies requiring the same subservience and lack of academic independence formerly more limited to economics departments and business schools. The mind set is that of controlled thought.
As the Chicago Berlin lectures explained, the entire Academy has become corrupted at America's top research universities, with Chicago and Harvard at the vanguard here. Both largely control the top academic journals in the key and expanding areas. Much independent scholarship is being squeezed out. Academic freedom has been compromised and far too few seem concerned about it as long as their pay checks keep coming.
The implications are horrific. Decay abounds. Dismay attends. Young faculty are disheartened. Orthodoxies ossify and more serious and innovative scholarship is driven underground and deflected into more amorphous think groups resembling loosely organized, apolitical think tanks. But almost no one openly talks or writes about the problem, either its source or its implications.
It is the elephant in the parlor people simply talk around as though it is not there. But where does all this lead? The answer is less clear than the reality of the problem. More minor universities without money ascend. Scholarship spreads out of the usual channels. New and minor journals become interesting and read. Groups of authors publish without university sponsorship. There is much leakage at the edges.
But for America's top universities, once its greatest pride, these developments cannot end well.
Trump Is Quentessentially the GOP
23 October 2016 | Pago Pago, American Samoa
In its servitude of the core oligarchy, the GOP has created the mess that is America today. The GOP has pushed hard and continuously for hatred of our federal government. The GOP has propagandized the bogus views of laissez faire, libertarianism. The GOP has stalemated our federal government and the Supreme Court with scorched earth policies. The GOP has pushed for government shutdown at times. The GOP has also pushed for austerity. The GOP has fought progress and reform at every turn. The GOP has argued for trickle down economics and then it has destroyed the tax system. Taxes were made anathama by the GOP's Grover Norquest and friends. As this litany discloses, being intransigently unreasonable is very Republican itself.
FOX 'news' became the GOP's mouthpiece. And Americans became brainwashed to these views, aided by bogus and dishonest research from equally bogus Republican think tanks feeding the likes of the WSJ, the Washington Post, the New York Post, Fortune Magazine, Bloomberg News and other media.
Big conservative money and its GOP minions, including a few unthinking democrats, have rigged the economy, destroyed unions, tied up state legislatures and gerrymandered voting districts. The GOP has trashed Main Street and let their patron saint take American jobs to others overseas. The GOP has crowned Greed as king and tried to make it a saint as well. The GOP pushed for and has succeeded in corrupting government and especially congress with big money, and, along with some unthinking Democrats, has bought off government for all the wrong interests, selling out the public interest along the way.
Into this GOP mess, Trump steps big time and he is the perfect fit, even as the GOP shirks in horror at the reality of him. Unbounded crassness and unrestrained political and personal behavior, of the bases sort, is very libertarian and very much the new GOP, except in Trump it is out of GOP control or any control. He is, however, the logical conclusion of all GOP thinking and policy, backroom conservations, indecency and the GOP's crass uncaring behavior toward "others."
Trump is a mirror to the GOP itself.
Our Blind Side
23 October 2016 | Pago Pago, American Samoa
It occurs almost to next to no one that the core reason for our economy being held back and stuck in a rut of very slow growth is our excessive income inequality and the high liquidity preferences of the rich and wealthy.
Consider the size of the problem. Those hoarding huge sums are corporations and the rich and wealthy who control them. The top 50 U.S. companies hold $1.4 trillion just in cash. Total corporate hoarding of cash is estimated to be 2.5 trillion and that doesn't include near cash or personal hoarding by the rich and wealthy. Much of the increase in the stock and bond secondary markets is their hoarding plus cash saved in banks a small portion of which gets loaned out for real investment but later, with delays. Just world billionaires are hoarding $1.7 trillion and that is just in cash only and the US has over half of them. Total mostly cash hoarding is on par I suspect with total QE and open market operations toward the same end probably about $5 trillion mostly in cash and much more if we include much of the increases in stock and bond secondary markets as near cash. People don't understand the scope of the problem.
Clearly mega bucks are involved, but most think just cash can be hoarded and that is not true. What is hoarded is what is not spent of current income on current consumption and current real investment and those hoards build up over time as part of accumulated wealth so I suspect my educated guesses are mostly for cash recently. Value that can be quickly liquidated to cash.
Because so few understand Keynes, as I explain him here, useful data are not gathered and are only kept partially and then often just for cash. One way of estimating current hoarding would be to go the other way and estmate Y - C - real I - net exports. Work for someone.
An notable exception to this national and partially willed blind side is Larry Summers who, seems to have turned over a new leaf, and is tip-toeing up to these issues, knowing they are political hot potatoes. Now that he has been allowed back into Harvard's economics department, after a period of banishment to the Kennedy School of Government for his many, earlier sins, he faces the threat of a research funding squeeze for the department if he become as loud and clear about these matters as I am, but I can tell he wants to be.
Most others remain out to lunch or effectively silenced. Yellen and the Fed are clueless. So is Obama. So is our austerity loving congress. There are very few wrinkles on the horizon for the controlling oligarchy, but Summers is twitching.
A Critique of Friedman’s Core Analysis on Government Spending
23 October 2016 | Pago Pago, American Samoa
You must understand the center of Friedman's teaching career was in the mid-fifties when income inequality was not an issue and hoarding was much less of an issue. Friedman never focused on Keynes' idea of liquidity preference and the liquidity trap at all in all the classes I took from him for the four years when I took all of his courses (1965-1969). He talked only about the demand for money, which I argued, as Keynes did, was really a demand for liquidity not just money. That was a close as he got. Nobel laureate Robert Mundell, America's most articulate Keynesian (who later developed supply side economics, just as a mental exercise) was teaching at Chicago at that time and he covered those topics, but only very briefly.
Hoarding was not a serious problem then as it had been when Keynes wrote the "General Theory" in the thirties during the great depression. Consequently, Says' Law came close to applying in the 50's and 60's so GPD = National income = Y = C + I when S = I which is what is still what is taught in basic mainstream economics courses with interest rates as the equilibrating variable on S = I.
Later, as now, with hugely excessive income inequality, hoarding by corporations and the rich is a huge problem so GDP is not equal to Y and Y= C - H where H = S - I. Apple alone holds 181 billion in cash. And again, income hoarded is all income not spent on current consumption or current real, new investment, what we must have for GDP to = Y. The rich have so much money they can't spend it all while those much poorer spend every cent they can get (and sometimes more, using pay day loans). Hoarding occurs, as Keynes explained, when people, mainly the rich, have a high preference for liquidity and stick hoarded money in secondary financial markets and cash where they can get it to cash very quickly. Real investment ties money up in business expansion and new plant and equipment and does not satisfy high liquidity preference. So a high preference for liquidity decreases both C and I.
Next, we must keep in mind, Friedman's political biases. He hated for the government to interfere in the economy and its markets and publicly espoused the view that markets worked correctly and mostly flawlessly. However, he told his graduate students he knew markets made mistakes, but he believed regulators could not correct or prevent them because they were captives of their industries - namely, bought off. So Friedman was at heart and mistakenly, a core enemy of Keynesian stimulus spending and economic intervention, EXCEPT, he conceded the Fed had to interfere and intervene to keep the economy on track by regulating the money supply. This is the background needed to understand Friedman. Now turning to his essay.--
Fallacy: Government Spending and
Deficits Stimulate the Economy
by Milton Friedman
An increase in government spending clearly benefits the individuals who receive the additional spending. Considered by itself, it looks as if the additional spending is a stimulus to the economy.
But that is hardly the end of the story. We have to ask where the government gets the money it spends. The government can get the money in only three ways: increased taxes; borrowing from the public; creating new money. Let us examine each of these in turn.
[This is incorrect. Government expenditures are based on credit and the totals try to follow budgeted allotments. The government later has to fund such purchases by tax revenues or borrowing. It cannot or does not create new money. Only the Fed does that.]
■Additional taxation. In this situation, the dollar cost to the persons who pay the taxes is exactly equal to the dollar gain to the persons who receive the spending. It looks like a washout.
[This is misleading. For the economy it is not a washout. If idle hoarded money is taxed and spent on real consumption or investment, it is a net gain to the economy and to all those involved.]
Getting the extra taxes, however, requires raising the rate of taxation. As a result, the taxpayer gets to keep less of each dollar earned or received as a return on investment [true], which reduces his or her incentive to work and to save [false]. The resulting reduction in effort or in savings is a hidden cost of the extra spending. [Not true] Far from being a stimulus to the economy, extra spending financed through higher taxes is a drag on the economy. [false]
[This analysis is basically wrong; the rich who hoard simply have their cash hoards taxed a bit and drawn down, but given their strong preference for highly liquid cash and near cash, they simply work harder to reestablish those cash hoards. (I have done this myself when in the 1%.)]
This does not mean that the extra spending can never be justified. However, it can only be justified on the ground that the benefit to the people who receive the spending, or to the community from the activity to be financed by the spending, is greater than the direct harm to the taxpayers plus the hidden cost. It cannot be justified as a way to stimulate the overall economy.
[No hidden cost. Gain analysis must include greater work effort to reestablish preferred cash or near cash levels. A beneficial double whammy. Otherwise, Friedman is correct here.]
■ Government spending financed by borrowing from the public. Individuals who purchase the securities that finance the additional expenditure would have done something else with the money. [Yes, hoard much of it in cash and secondary markets instead of spending it all on consumption and real investment.] If they had not purchased the government securities, they presumably would have purchased private securities that would have financed private investment. [Assumes original stock offerings which is rarely the case. Most hoarded money goes into secondary financial markets to push up stock prices] In other words, government spending crowds out private investment. [Not at all true.] At this level, it is again a washout: those who receive the extra government spending benefit, but the private investors, who are deprived of the same amount of funds, lose. [false. See analysis above.]
But again, that is too simple a story. [true] The overall effect is an increase in the demand for loanable funds, which tends to raise interest rates. [No. hoarders do not borrow to hoard more. They mostly work harder to reestablish their cash and near cash levels to meet their preferences.] The rise in interest rates [There is no such rise. Yields and interest rates are depressed by hoarding pushing up stock and bond prices in secondary financial markets.] discourages private demand for funds to make way for the increased government demand. [No. rates are pushed down as I explain (what we observe now) and we get any investment gain from it which is small because hoarders do not want new real investments so far removed from cash.] Thus, there is a hidden cost in the form of a lowered stock of productive capital and lower future income. [false, there might even be a gain from depressed yields and rates.]
The Keynesian view that the spending is stimulative assumes that the funds the government borrows would not otherwise have been invested in the private capital market [usually true], but came simply from cash held in hoards by individuals from under the mattress [True, but Friedman misunderstands hoarding and liquidity preference as I have explained them]. In addition, it assumes that there are unemployed resources that can readily be brought into the work force by activating the excess funds held by individuals, without raising prices or wages [true].
That is a possibility in some special cases, such as the Great Depression in the 1930s, when there had been a major reduction in total output and prices were very far from their equilibrium level. [True then and true now too, with such great income inequality and great hoarding by the rich.] More generally, however, theory suggests and experience confirms that government spending financed by borrowing from the public does not provide a stimulus to the economy [Not true in US or most foreign countries now.]
Japan provides a dramatic recent example. During the 1990s, the Japanese economy was depressed. The government tried repeated fiscals stimulus packages, each involving increases in government spending financed by borrowing. Yet -- or maybe therefore -- the Japanese economy remained depressed. [Not true. Look at graph of Japanese per capita real income growth and it has been monotonically and steadily up, even through the 1990's, except for a dip later. See my graph in comments.]
■ Government spending financed by creating new money. In this case, there is no first-round private offset to the government spending. It looks as if it is clearly stimulative, and it is. The question is: What is doing the stimulating? Is it the government spending, which in the previous two cases was not stimulative? Or is it the increase in the quantity of money by which the government spending is financed? [Government spending in the US is never financed by newly created money. Only the Fed can increase the money supply which it does by open market operations and QE.]
Suppose the monetary authorities simply added to the money supply without any change in government spending. (They [the Fed, actually] could do so by purchasing government securities on the market.) The additional demand for government securities would raise their price, which is equivalent to a reduction in the rate of interest. If the sellers of the securities simply put the new money under the mattress [or in secondary markets, driving up prices], that would [mostly be the] end the story and there would be no stimulus. They are far more likely, however, to use the money for some alternative investment, or to spend on consumption [or some mix of all of the above]. That would lead to exactly the same additional spending as using the money for government spending, but the extra spending would be in the private economy, not the public sector. [Yes, for the EXTRA spending, but the total is increased because of the original increase in government expenditure].
Digging deeper, the extra spending will initially be reflected in some combination of increased output and increased prices. The exact division will vary greatly from time to time, depending on the state of the economy and on whether the extra spending was or was not anticipated. [mostly output] If the initial situation were one of an economy roughly at its capacity level with reasonably full employment, a temporary stimulus to more production would be followed by a higher price level. [True] After the price level had adjusted, the real economy would be back where it had started, unless there were further increases in money, setting off an inflationary spiral [true, but just more inflation, not necessarily a spiral].
On the other hand, if the initial position were one of deep recession with unemployed resources, a much larger fraction of the increase in spending would be absorbed by an increase in employment and output, and a much smaller fraction by a rise in prices. [True] Similarly, if the initial situation were one of incipient inflation, even the initial effect might be to produce inflation. [True]
■ Confusion between monetary stimulus and fiscal stimulus. The fallacy that government spending and deficits stimulate the economy has gained credibility because the extra spending is so often financed by creating new money. [Not a fallacy, as I have shown] In that case, fiscal policy (changes in government spending and taxation) and monetary policy (changes in the quantity of money) are both in play and it is easy to attribute the effects of monetary policy to the effects of fiscal policy.
In order to get empirical evidence on the separate effects of fiscal and monetary policy, it is necessary to find episodes in which fiscal and monetary policy are moving in opposite directions, or one is neutral while the other is not. The example of Japan in the 1990s noted earlier is one such episode. In that case, monetary policy was repressive or at best neutral and fiscal stimuli programs were ineffective. [No. Not true. See chart.]
Over the course of years, I have studied a number of similar episodes both in the United States and around the world. In every case, fiscal policy intended to be expansionary was expansionary if and only if monetary policy was accommodating. [True most of the time, but not if and only if, as I indicate. Hoarded money put back in circulation against goods and services is a big exception] This empirical evidence is consistent with the theoretical analysis of the preceding section
22 October 2016 | Pago Pago, American Samoa
Marriage is an institutional convenience mostly for the sake of children
That compromises the peacefulness, freedom and adventure of life
But replaces them with companionship and some security and predictability.
Peace and adventure alike are traded in for turmoil and routine.
Troubles and pains attend both states alike.
Modern men and women should understand these things
Before choosing which life to live and for how long.
One Consequence of the Greed of Our Oligarchy
09 October 2016 | Pago Pago, American Samoa
About 155 million Americans are participating in the US labor force in one capacity or another and to some extent or the other. However, about 94 million adult Americans are not participating in the labor force at all and the number has risen markedly in recent years. The question is why.
To be sure, demographical changes are involved, but so are structural changes in the labor market as well. Many out of the market lack serious and significant college education while that market has shifted to demanding ever more training. There are more than 5 million job openings presently unfilled but virtually all employers want serious skills or capabilities. The bogus unemployment rate of around 5 percent is a ruse designed to mask the problems of the 94 million that I will dig into here. American policy has developed a studied blind eye and indifference to the problems of these Americans most of whom are or were in the decimated American middle class.
The demographic changes, or in some cases, excuses, are pretty obvious. Boomers retiring (but why), millennials going back to or staying in school longer (again why) and similar comments. But the demographic changes in so short a period do not explain or account for most of the 94 million Americans not in the labor force presently. The evidence is about half of the decline in prime age male labor force participation is due to feeling compelled to take early retirement, and that only 20 to 30 percent of the decline is due to reduced such labor demanded albeit at lower wages.. Many misinterpret the data in an effort to waive the problem away with simple explanations. But much more is going on as I will explain.
One problem rarely mentioned is the change in the structure of demand in the labor market. The big change was when the market had a job position for most all workers at all skill levels with acceptable pay to when the market only wanted much more highly skilled and educated workers for higher paid jobs. Part of that was due to increased mechanization and robotitization of much work. Part of that in turn was due to the hatred of middle management toward the rank and file workers with their breaks, sick leaves, demands, unions and many other problems.
Another part of structural change in demand was much of the need for lower end labor disappeared when American business shifted millions of jobs overseas to cheaper labor abroad in order to pocket the difference. The bottom fell out of the low end labor market except for location specific and highly interactive grunt work like flipping burgers, grooming dogs and installing air conditioning systems. Much low skill work shipped abroad was later mechanized and robotitized there too. The structural demand for labor in the US has shifted big time. Many in middle management of the rank and file also lost their jobs as well when those jobs were also shipped overseas. The impact on middle class American has been huge. Many middle managers lost their jobs and went to flipping burgers before retiring early in despair.
Many retired early because they could not find a decent job. Too much unskilled labor was soon pursuing too few suitable jobs. As Juhn, Murphy and Topel (1991, 2002) explain, the ensuing secular decline in real wages of less skilled men is a major contributor to the secular decline in the participation rate of prime aged men in the labor force. CEA (2016) reaches a similar conclusion, as the decline in labor force participation has been steeper for less educated men. People do not want to work for peanuts is a key reason for lower labor force participation in America's middle class and part of the reason for the middle classes decline. But there is more.
Early retirement of prime aged men has had huge consequences. Marital strife rose, so did divorces. Homes and savings were lost and the situation was made much worse by the housing crash and Great Recession when many others lost their homes, too. Image a likely situation.
Middle manager husband losses his management job paying $65k a year and the income from it. After unsuccessfully looking around for an acceptable job and much family strife, he takes early retirement. His wife is hugely upset. Son, a 25 year old millennial, is sleeping on the sofa, has a $10,000 college loan and is going to some fraudulent for profit school and getting a useless education before dropping out, while his high school age sister is forever complaining about how he and his messes have taken over the living room of the house. But the family soon loses its house when the family savings are depleted and the mortgage company forecloses. There are many variations on this theme. Others don't lose their house until the housing market crashes. The psychological stress and damage are considerable. That is what the evidence shows.
Even by international standards the participation rate of prime age men in the U.S. labor force is notably low. Only Italy is lower among all 33 OECD advanced nations. Because prime age men usually have the highest labor force participation rate of any demographic group, the result is disturbing.
One reason now listed for lack of labor force participation among prime aged retired men is the current state of their health. Forty-three percent of prime age men who are out of the labor force reported their health as fair or poor. It is highly probable that extended joblessness and despair induced by weak demand for their labor have caused or exacerbated many of the physical, emotional and mental health-related problems that currently afflict many prime age men out of the labor force. The evidence is about half of the decline in prime age male labor force participation is due to early retirement, and that only 20 to 30 percent of the decline is due to reduced labor demand, albeit at lower wages, suggesting a major role for the factors I identify tied to mental and now physical health.
Survey results for prime aged workers retired from the labor force indicate that such individuals experience a great prevalence and intensity of pain in their daily lives. As a group, such workers out of the labor force report feeling pain during about half of their time. And for those who report a disability, the prevalence and intensity of pain are higher - disabled prime age men report spending 71 percent of their time in some pain. It is surmised much of this pain short of a verifiable disability is psychosomatic. Other survey data report that unemployed 55-70 year old women, are unhappy and dissatisfied with their lives. Men in the 55-70 year old group who are unemployed also appear to be quite dissatisfied and unhappy with their lives compared with employed men and women the same age
This pain and unhappiness contrasts to its absence among my geriatric ex-pat friends and buddies all in our seventies and early eighties. We are all active, hale and hearty. One, 80, drives around on a big Harley and is still practicing architecture. Also, isn't 60 now supposed to be the new 50, as SS talk proceeds about raising the retirement age? Has the economy so damaged so many middle class Americans psychologically? I think it has.
We have a major unreported social problem, if not a scandal, here and few have any clue about it. One partially informed scholar, for example, calls the increase in jobless men who are not looking for work "America's invisible crisis" and he doesn't even reach the reasons or consequences. Many deny any problem. But the truth is the decline in real wages and loss of decent jobs for many men and women, and the ensuing trauma, unhappiness and pain they have produced, is a major contributor to 1) the secular decline in the participation rate of prime aged men and also some women in the labor force and also to 2) their impaired happiness and health. But, hey, the rich got richer.
A Common Economic Misunderstanding
06 October 2016 | Pago Pago, American Samoa
The Problem: 'When we say income "hoarding," what are we referring to? The rich don't hoard money by sticking money in their mattresses. They invest their money. They buy stocks, bonds, CD's, real estate, and start ups. These actions do stimulate the economy, directly and indirectly'.
Most don't understand this issue or Keynes' theory. What Keynes did was explain why Say's law does not apply. Say's law, in its most common formulation, explains that production equals consumption plus investment, that is GDP = national income = Y = C + I, consumption and investment. This is taught as basic classical economics, even today, regrettably.
Keynes actually said in his "General Theory . . ." that Say's law does not apply because some wealthier people don't want to spend all their income on current consumption or real current investment. They have have a higher preference for liquidity. They want cash and liquid assets close at hand so that means they can't be consumed or be truly invested in real investment in illiquid new real assets.
Current real investment does not include money squirreled away as cash or put into liquid secondary financial markets, like the stock and bond markets. It includes only money spent on IPOs which in turn spend that money on real longer term immediate investment, and money invested in real businesses immediately, etc. Money not spent on real current investment or current consumption negates Say's law where GDP = national income or Y = C + I (where S=I). Keynes' implicit formulation is Y = C - H where H = S - I or Y = C - (S - I). Hoarding, H, is introduced to the analysis and satisfies the need for high liquidity preference, but with great income inequality can create a liquidity trap where one can stall the growth of a large economy.
Those with high liquidity preferences hoard. A liquidity trap can occur, Keynes said, at some low interest rate where the demand for liquidity or liquid assets is very high, and highly liquidity assets (mostly cash and secondary financial assets) are sought so the demand for them becomes almost perfectly elastic (very, very great). Current real investment is never liquid. Serious hoarding in large sums can only occur with substantial income inequality, because otherwise people need to spend most of their income on consumption and can save only a little which can be really invested so something approximating Say's law is restored. That is it in a nutshell.
Money hoarded from the flow of income into consumption and real investment impairs that flow and impairs future income which slows the economy. It also slows the velocity of money where MV = GDP so the Fed has to increase the supply of money to counteract the reduced velocity of it from hoarding by the rich in order to maintain GDP. This is a huge drag on growth and why we are in our new "lower low" of slowed growth, relative of course, to what it could be otherwise.
Keynes is very poorly understood by most including many economists and professors of mainstream classical economics, e.g., Greenspan, et al. (Apologies for the very basic algebra, but I thought it might help some.)
Where I Differ on Economics From Most
04 October 2016 | Pago Pago, American Samoa
These are largely questions of economic judgment and focused emphasis. Weights that should be according, albeit here in no particular order.
Unlike to many others, many of whom follow every market twitch and their predictions, I am personally stuck on these issues which I think are our core problems:
1) hoarding and the liquidity trap we are in, with its consequences for the Fed and our secondary financial markets -- an unconscious hijacking of sorts by the oligarchy and a problem only possible with excessive income inequality,
2) excessive income and wealth inequality in the US and it consequences for many Americans and our damaged economy, and
3) the dessimation of the core middle class with 90 plus million Americans now not in the labor force and middle class wealth substantially destroyed due to too many lost homes in that sector. Many in the middle class have sunk into the lower class and a few at the top end of that class have risen above it. But if we kept track of the middle class by peoples names with their financials from the 1990s, we would see what has happened.
The silence on these points in the media and in America and public policy discussions is I think is an outrage. Many affirmatively work to cover up and deemphasize these problems up in order to deny them. They are handmaidens of the status quo and the oligarchy.
Our income and wealth inequality is massive and out of control, The top 10 percent of Americans get almost 50 % of all national income and now have almost 75% of all wealth in the country. The top 1% get 22% of all national income, double the 11% that the bottom 50% of all income recipients get. Only the rich and wealthy can afford to hoard income and that is a mega problem tightly connected to problem 1) above.
As a nation we are politically and emotionally too unable to face, much less address theses problems. We are being schooled in denial and taught to do nothing by the controlled system. We have no policies or remedies at present and and so are consigned to a less than happy nation and to our new "lower low" of growth, all relative of course were we would be but for these problems. A point deniers simply refuse to understand.
Why We Should Vote for Hillary
01 October 2016 | Pago Pago, American Samoa
Hillary is preferable to Trump for two reasons, assuming the republicans retain congress The first is thinner and the second is substantial. They are: one, her SCOTUS nominees will be much better, but if the Senate continues to block the appointment process, that might not amount to much. Two, with Hillary we avoid the highly probable and likely larger mistakes of Trump-- as possibly approved by a republican congress (albeit with modifications) -- in favor of Hillary's own putative messes and mistakes, which clearly won't be. The second advantage is significant.
The Republicans will largely constrain Hillary, as a women, in the same manner as they constrained Obama, as a black. Neither is a preferred status for the white house by republicans That it didn't take much to restrain Obama, as a republican Lite, is largely irrelevant, because even if Hillary is more aggressive, it won't matter. Hog tying her is doable with a republican congress. However, that might not be a that bad a thing inasmuch as neither Hillary, nor Obama understand the economic problems facing America, as set out in the Harvard Report I have mentioned. We are consigned to likely wasting time with Hillary, but at least Trump and his consequences will be blocked.
Now if the Democrats can win both houses of congress or at least the senate - a tighter race in some regards than most imagine -- then we have a whole new ball game. We will get good and effective SCOTUS appointments and that is a big win, especially if she can appoint three Justices with younger nominees. What else she can do remains to be seen. She is inclined to create policy messes with unintended consequences, but with a Democratic congress or senate those might be ameliorated. Still she hasn't a clue about America's fundamental economic problems and offers us little chance of fixing them. Band-Aids will likely be applied. As we can see, much depends on congress and the senate. That is where our attention should be focused, but it is not.
In truth, it is the republican house that is most vulnerable to loss, not the senate. While that would be a major victory, it would not be as big a win as getting control of the senate, but might have some similar affects. Republicans might throw in the towel on blocking SCOTUS nominees and might be more cooperative generally. Much remains to be seen. But still don't hold your breath on Hillary becoming a great president, Her history and the odds are against it.
Hillary, Trump and their Similarities
29 September 2016 | Pago Pago, American Samoa
Both are ambitious and both are erstwhile self promoters, Trump overtly and brashly and Hillary behind the scenes, as a manipulator working in secret. Trump was always that way. Hillary became that way after following Bill and being duped by his peccadilloes, cumulating in Monica Lewinsky's relief act for Bill and ensuing impeachment hearings. Trump fancies himself as a business success who has the silent, wounded majority behind him and Hillary fancies herself as a policy wonk capable of righting big social and economic wrongs. Both misconceive of themselves, except for their ambition.
Trump almost failed totally after buying the Taj Mahal Casino, until his bankers decided his assets were worth more with his name on them than being tossed into bankruptcy. They stuck it out with him, dumping his airline and that casino. All recovered. Hillary has been a policy disaster time after time, beginning with her failed healthcare plan in Bill's first term, and her efforts as Secretary of State for Obama, including doing nothing about Benghazi, creating chaos in Libya by murdering Kaddafi and making a mess out of her email situation. As a senator from New York she didn't do anything except get ready to run for the presidency. Both actually excel at promoting themselves and both have too little to recommend themselves.
If Trump messed up royally with his birther campaign (squelched by Obama releasing his birth certificate showing he was born in Hawaii) Hillary does equally as badly. After campaigning against Obama by claiming his promises were naive, unrealistic and not politically doable, now she is adopting as her own many of those same policies for her own campaign. Trump is as bad with the truth as Hillary is with her mess generating policies. She is no more of a wonk than he is accurate.
Hillary talks a good line and has her liberal following. Trump connects with the disenfranchised middle of America that is fed up with the status quo. But both don't even know what is fundamentally wrong with America, much less have any outlines for solutions to those problems. Both only know they want to be president and think they deserve it.
Our True Situation: For the Lazy and Ill-informed -- Spoon Feeding
28 September 2016 | Pago Pago, American Samoa
Hillary and Trump are clueless. So was Lester Holt. So are most. As I have been saying . . . These are the core issues. The rest is peripheral. Source:http://www.zerohedge.com/news/2016-09-15/harvard-debunks-obama-recovery-farce
This is the picture of a nation in serious longer term decline. A lost nation with clueless leaders and no sound policy directions. We cannot continue to do well with these trends except by smoke and mirrors which is how we are proceeding. Hey, the unemployment rate is only 5% or so! Almost everyone's working, right?
The Causes of Income Inequality Primarily Include --
26 September 2016 | Pago Pago, American Samoa
--the rigging of the economy in favor of the rich and wealthy by congress, the Fed and government in myriad ways
-- the off shoring of American jobs by the rich with congress allowing it
--the smarter and better educated rich and wealthy
--the theft of the value of labor's increased productivity by corporate America since 1973
--the falling real minimum wage (part of first item)
--capital grows more quickly than wages do (Piketty)
--the declining quality and rising cost of education for the middle class
--the declining percentage of working age people fully employed
--the shift of income from workers to top management by top management
--the rise of robotics
--the relative decline in higher paying jobs relative to earlier
--the lack of any government policies to address these problems
<strong>Why the Fed Can't Hike Rates and Stop Increasing the Money Supply</strong>
25 September 2016 | Pago Pago, American Samoa
With the massive income inequality we have, as long as the rich keep hoarding a large portion of their current income -- by squirreling it offshore and in secondary stock and bond markets, instead of spending it on current consumption and real investment -- the velocity of money will continue to fall, growth will stall or decline, and the Fed will have to counteract both by lower rates and easy money to avoid recession, where MV=GDP. Lower rates and easy money in turn prop up the stock and bond markets and encourage borrowing. We have a catch 22 and the Fed knows it.
With higher rates and tight money in the face of falling velocity from hoarding, recession and declining secondary financial markets are the only possibility and the Fed also knows that. Inflation is not a prospect unless the hoarding or high liquidity preference stops (or the Fed over does it) and the velocity of money consequently starts to rise.
Don't hold your breath. The problem is massive income inequality where the top 10 percent get almost 50 % of all national income and have almost 75% of all wealth. The top 1% get 22% of all income, double the 11% that the bottom 50% of all income recipients get. Only the rich and wealthy can afford to hoard income.