Dec 2 2012

It’s the economy, stupid! Is it about to crash?

Kal @ 19:35

In this post Our Collapsing Economy and Currency we learn:

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

And a bit later:

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

And finally:

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

Tags:

Category: Accounting | Conventional Economics | Economics | Recession

Oct 10 2012

Is man-made capital a substitute for nature’s capital?

Kal @ 19:15

Paul Craig Roberts was Assistant Secretary of the Treasury under Reagan and was one of the main proponents of his supply-side economics. I thought those policies were totally ridiculous at the time and paid him very little mind. For the past couple of weeks I have been reading his blog, PaulCraigRoberts.org. He has strong opinions and he knows a lot about economics. At least some of what he says is spot on. On Friday, 5 May he published the text of an interview by World Affairs Monthly. He talks about the evil of offshoring jobs and suggests something that could be done to alleviate it. Good stuff.

He then goes on to talk about the limits of growth, a topic rarely discussed by mainstream economists.

A more fundamental problem than economists’ ingrained misconceptions about jobs offshoring and free trade is the Solow-Stiglitz production function that is the basis of modern economics. The Solow-Stiglitz production function assumes that man-made capital is a perfect substitute for nature’s capital. This assumption means that there are no ecological limits to economic growth. When we run out of natural capital, man-made capital simply takes its place.

As Nicholas Georgescu-Roegen demonstrates conclusively, this assumption, which is the basis of modern economics, is “a conjuring trick.” Man-made capital and natural capital are complements, not substitutes. Production transforms resources into useful products and into waste products. Natural resources are what are transformed, and labor and man-made capital are agents of transformation.

What is happening in today’s world is that nature’s capital is being exhausted, both the resources and the waste sinks–the places that the waste products from production can be deposited. The air, soil, water, and oceans themselves are being polluted by the waste products of economic activities. As these “external costs” from pollution are not included in costs of producing GDP, economists have no way of knowing if an increase in GDP is worth more than its cost….

There is a lot more food for thought in the interview. Give it a read.

Tags:

Category: Accounting | Conventional Economics | Economics | Employment | Politics | Steady-State Economics

Oct 4 2010

Physics Trumps Money

Kal @ 10:31

George Mobus  writing in Question Everything - When what is happening in your world doesn't make sense, when it doesn't conform to your beliefs about how things should work, it's time to ask hard questions.

Work, Exergy, the Economy, Money, and Wealth -- A Sort-Of Tutorial

This is something of a tutorial on the relationship between energy and the economy. I have been dismayed by how often people express their lack of knowledge about that relationship. Such expressions come in the form of beliefs that money is what drives the economy. Or the belief that human desire to accumulate monetary wealth is the motive force for economic growth. Indeed I doubt that most people ever think of physics when they think of the economy. But the reality is that the economy is very much a physical process that requires energy to continue operating. All of the money in the world will not suffice to maintain the motivation of the wheels of industry unless it can be used to exchange for energy flow. Here is a guide to how the real wealth of nations is created and a more concise look at the nature of energy flow needed to do so.

More...

Tags:

Category: Accounting | Conventional Economics | Economics | Resource Depletion | Steady-State Economics | Sustainability

Apr 11 2010

Permanent High Unemployment – Time to change the game

Kal @ 11:34

In the US somewhere between 10% and 20% of the working age adults are out of work and there are no realistic prospects of this changing any time soon. Many other parts of the world have way higher unemployment rates.

How it works now

To the unemployed individual this is devastating. At first, for the lucky few, there is unemployment insurance providing some fraction of the person’s former wage. After unemployment insurance runs out there is some form of charity, either from the community of from the family.

The unemployed person has had a change of status and in most cases a sever change in the amount of available resources, but these unfortunates do not go away. Many have families dependent on them for support and these support needs continue whether or not the person is working. Someone has to pay the rent and supply the food and other necessities of life.

In times of near full employment the unemployment insurance system works relatively well. The newly unemployed gets enough to get by but not so much as to be too comfortable while finding a new job. Jobs are easy to find and the earnest applicant finds one quickly with only a small disruption to life.

In times like these unemployment insurance really does not work at all. For every available job there are hundreds of over qualified applicants. The government keeps extending the unemployment insurance period, but nothing changes to make finding employment more likely. The working resent those looking for work and those looking can clearly see that the system is not treating them fairly.

More...

Tags:

Category: Conventional Economics | Guaranteed Wage | Politics | Recession | Sustainability

Dec 5 2009

No More Energy Worries

Kal @ 23:24

Yet another wingnut email. This one is somewhat plausible, but wrong none-the-less. I have no idea what Lowell’s comment about the environmentalist means, but the most likely outcome for “all that power” is that it stays in the ground.

Thanks to the environmentalist,  How do we get rid of all that power?

Lowell M

---  
Read the whole report especially the end. This is real eye opener.
Subject: FW: Bakken Oil --More than the rest of the World combined

More...

Tags:

Category: Climate Change | Conventional Economics | misinformation | Peak Oil | Resource Depletion | wingnuttery

Oct 24 2009

Jay Hanson – America 2.0

Kal @ 22:34

AMERICA 2.0!
By Jay Hanson, 10/6/2009 (minor revisions on 10/14/2009)
This paper is hereby placed in the public domain and may be reprinted without further permission.
Original here

We must all hang together, or assuredly we shall all hang separately.”
—Benjamin Franklin, 1776

“The aim of every political constitution is, or ought to be, first to obtain for rulers men who possess most wisdom to discern, and most virtue to pursue, the common good of the society; and in the next place, to take the most effectual precautions for keeping them virtuous whilst they continue to hold their public trust.”
—James Madison, FEDERALIST #57, 1787

ABSTRACT

The “bad news” is that “peak oil” marks the beginning of the end of capitalism and market politics because many decades of declining “net energy” [1] will result in many decades of declining economic activity. And since capitalism can’t run backwards, a new method of distributing goods and services must be found. The “good news” is that our “market system” is fantastically inefficient! Americans could be wasting something like two billion tonnes of oil equivalent per year!!

In order to avoid anarchy, rebellion, civil war and global nuclear conflict, Americans must force a fundamental change in our political process. We can keep the same political structures and people, but must totally eliminate special interests from our political environment. A careful review of the progressive assault on laissez faire constitutionalism and neoclassical economics, from the 1880s through the 1930s, explains how this can be done legally and without violence. These early progressives showed how we can save our country. All that is lacking now is the political will. I call this adjustment of our political environment “America 2.0.”

To achieve America 2.0, we must first separate and isolate our political system from our economic system so that government can begin to actually address and solve societal problems rather than merely catering to corporate interests. The second step is to retire most working American citizens with an annuity sufficient for health and happiness, as government begins to eliminate the current enormous waste of vital resources by delivering goods and services directly. This would allow most adults to stay at home with their families but still receive the goods and services they need to enjoy life.


More...

Tags:

Category: Climate Change | Sustainability | Steady-State Economics | Resource Depletion | Politics | Economics | Conventional Economics | Peak Oil

Oct 24 2009

Mules and cows - barnyard humor for the new century

Kal @ 20:48

This e-mail reminded me of a post I did back in February: The Cow Theory of Economics and Accounting.

This e-mail is really pretty clever, even if the point is to take another pot shot at government.  And I believe I saw it before, but do not recall where.

Mule - Check this out.
clip_image001
Hughie & Teddy

Hughie and Teddy saw an ad in the Starkville Daily News Newspaper in Starkville, MS. and bought a mule for $100.

The farmer agreed to deliver the mule the next day.

The next morning the farmer drove up and said, "Sorry, fellows, I have some bad news, the mule died last night."

Hughie and Teddy replied, "Well, then just give us our money back."

The farmer said, "Can't do that. I went and spent it already."

They said, "OK then, just bring us the dead mule."

The farmer asked, "What in the world ya'll gonna do with a dead mule?"

Hughie said, "We gonna raffle him off."

The farmer said, "You can't raffle off a dead mule!"

Teddy said, "We shore can!  Heck, we don't hafta tell nobody he's dead!"

A couple of weeks later, the farmer ran into Hughie & Teddy at the Piggly Wiggly  grocery store and asked: What'd you fellers ever do with that dead mule?"

They said,"We raffled him off like we said we wuz gonna do."

Leroy said,"Shucks, we sold 500 tickets fer two dollars apiece and made a profit of $898."

The farmer said,"My Lord, didn't anyone complain?"

Curtis said, "Well, the feller who won got upset. So we gave him his two dollars back."

Hughie and Teddy now work for the government. They're overseeing the Bailout Program. clip_image002

Tags:

Category: Accounting | Conventional Economics | Politics | wingnuttery

Sep 27 2009

Obviously False Conventional Wisdom

Kal @ 14:37

From Three Types of Crazy

Read the whole article. It makes the point that false beliefs are not limited to “the nutty fringe”.

    (A) We can provide universal health care, like all other advanced industrial nations, and cut costs to 12% of GDP or less, like all other advanced industrial nations, while still allowing insurance companies to skim 30% off the top.

    (B) We can militarily subdue Afghanistan with enough troops and machismo, even though no one in history has ever done this before.

    (C) We can successfully deal with global warming without even trying to reduce atmospheric carbon to 350 ppm, which is what the world's scientists say is required.

    (D) We can fix the financial system without actually fixing the financial system, simply by trusting the folks who helped bring us the meltdown in the first place.

    (E) Money is speech.

    (F) Corporations are people, with all the Constitutional rights that entails.

    (G) Spending hundreds of billions of dollars on weapon systems that don't work, and/or aren't designed to fight enemies that actual exist means you are "strong on defense," even if you did everything human possible to avoid serving in a war zone when your country called. Questioning the wisdom of doing so makes you "weak on defense", even if you are a war hero.

There are literally dozens and dozen of such crazy beliefs that enjoy strong "centrist" support… But does anyone ever thing of them as evidence of some sort of dysfunction?  Yet, that surely is precisely what it is--evidence of a deeply dysfunctional political system.

Tags:

Category: Politics | Morals | Conventional Economics

May 19 2009

The Price of Being Poor

Kal @ 09:55

Think about it.  This is by Ian Welsh.

Washington Post hits on how much it costs to be poor - the way that the poor are forced to pay more, not less, for virtually everything; if not in money, then in time.

A friend of mine put it most simply.  Poor people spend time to save money.  Well off people spend money to save time.  That’s how you know where you are, assuming you aren’t living beyond your means.

The WP article isn’t bad, but it doesn’t really get the full flavor of poverty.  When you look poor, and if you’re poor long enough you will, you just get treated worse by virtually everyone.  They know you don’t have money, know you don’t have power, and thus know they can push you around, disrespect you or just ignore you.

My favorite story along this line is when I was barely making ends meet by doing odd jobs helping people move, doing yard work and painting houses.  One day after painting a garage, I walk into a bank with the check from the day’s work (this is in the eighties).  I’m disheveled, covered in dried paint, and look awful.  The teller wants to hold the check for two weeks.  I can’t wait that long, I need the money for rent.  I walk out of the bank.

I go back to the rooming house I’m living in. I shower, shave and comb my hair.  Then I go find my last set of good clothes - gray flannels, dress shirt, blazer, tie.  I put them all on, and I head back down to the bank.

Unlike a lot of people who are poor, I haven’t always been poor.  I went to one of the most elite private schools in Canada (ranked second at the time, after Upper Canada College).

I wait in line, and irony of ironies, I get the same teller.

She cashes the check.

Yeah…

But I don’t say anything, because I know she could capriciously change her mind.  I just walk out.

A couple years later, during the same extended period of poverty, I get to the point where I can’t even pretend to be middle or upper class.  And on occasion I get rousted because, while I’m clean, I look pasty, my clothes are threadbare and my glasses are literally taped up.  One time a security guard throws me off the property of a hotel I went into to use a pay phone.  In another case, I get tossed off the University of Ottawa campus: I’m beyond the point where I can fake being a student, even though I’m the right age, and was one just a few years before.

In the last ten years, since I ascended back into the middle class, I’ve never had any such situation come up.

Odd that.

The worst thing about being poor is the way you are treated.  There is no rule more iron, in my experience, that the less you get paid, for example, the worse you will be treated at work.  Clerks in stores treat you worse.  Government bureaucrats can often barely conceal their contempt.  And so on.

The upside, I suppose, is that people show you who they are.  The rare person who treats you exactly the same as they do everyone else is revealed as the shining gem they are.  In particular the friends who stick by you even when you’re down and out show themselves to be real friends, as opposed to those who follow the rule given in so many self-help books to cut off less successful friends, and thus reveal their complete moral bankruptcy to the world.

You learn who you can actually trust, who actually cares about you, and who is actually a decent human being who doesn’t enjoy being able to kick down on someone they figure can’t kick back.

It changes how you see people.  Oddly, before I was poor I thought practically everyone was scum (I was a cynical teenager).  Being poor convinced me that there were some truly good people in the world–people who would help you, be kind to you, or just treat you respectfully, even when there was nothing in it for them.

In ugliness and deprivation, beauty and kindness are much much more obvious.  All the more so, because so few meet this test and pass.

Tags:

Category: Conventional Economics | Economics | Employment | Guaranteed Wage | Morals | Politics | Recession

Mar 13 2009

Dead Banks Walking

Kal @ 20:31

Once again I turn to the straight talking folks at The Institutional Risk Analyst, Stress Test Zombies: Not Too Big Too Fail? Tough Tootsies Little Banks!

Apparently, banks that fail the Supervisory Capital Assessment Program stress test will not be broken up as required by law, but instead given more capital at taxpayer expense.

...

If you include the subsidy required for the GSEs and AIG, the US Treasury could face a collective funding requirement of $4 trillion through the cycle. Do Ben Bernanke and Tim Geithner really believe that they can sell such a program to the Congress? To put it in perspective, the $250 billion in the Obama Budget for additional TARP funds will not quite cover Citigroup (NYSE:C).

...

The way you end the need for public subsidy is by resolving these firms via a restructuring and forcing the bond and equity holders of the bank's public parent company to absorb the cost of marking assets to market. If we establish a hard rule regarding solvency and break up rather than recapitalize zombie firms, then we have started to apply a real solution.

...

Fact is, the Sell Side dealers have leveraged the real economy via OTC derivatives to such a degree that bailing out toxic waste sites like AIG, several large Euroland banks and the world of structured finance could cost trillions of dollars. That is the true cost of the crisis. The only issue is whether we recognize it directly, via a public resolution, or hide the costs via public subsidies and future inflation.

Tags:

Category: Accounting | Conventional Economics | Economics | Politics