Tuesday, August 30, 2016

Dear Millennials: If You Want to Escape Minimum Wage Debt-Serfdom...

Those without value-creating human/social capital will be mired in a low/minimum wage environment that will make it difficult to escape debt-serfdom.
Let's start with the sobering reality that the Millennial generation faces economic challenges that are unique to this era: sky-high student loan debt, soaring costs for basics such as rent and healthcare, a stagnant neofeudal crony-cartel economy and an intellectually bankrupt status quo in thrall to failed ideologies: Keynesian Cargo Cult central banking, outdated models of capital and labor and an unthinking worship of debt-funded centralization as the "solution" to all social and economic ills.
The potential solutions are also unique to this era. Never before has humankind had such a wealth of revolutionary decentralizing technologies: nearly friction-free peer-to-peer networks and commerce, decentralized cryptocurrencies and the expansion of what my friend G.F.B. describes as neo-tribalism: opt-in communities that are not bound to geography or central-state imposed identities.
Many smart, well-informed people see massive government stimulus using borrowed money as the "solution" to Millennial impoverishment and under-employment--in other words, more debt-funded centralization.
The idea here is that such debt-funded stimulus will employ millions of Millennials to rebuild America's crumbling infrastructure.
While we all understand the appeal of this proposal, those proposing it have little experience in actually building or repairing infrastructure. The assumption that such massive public spending will create millions of jobs is never examined closely, nor is the impact of adding trillions of dollars in additional public debt considered.
What such schemes boil down to is: Millennials are supposed to borrow trillions from their future earnings and their children's earnings to fund a few years of employment.
But what happens after the bridges get repaired and the homeless housing gets built? In the conventional fantasy, the economy magically moves into a self-sustaining growth cycle because those construction workers will be buying more coffee at Starbucks, more lunches at Mickey D's, and so on.
But the cold reality is: once the money has been spent, those jobs go away.Once the bridge has been repaired with public money, the workers are laid off because there is no private-sector funding for more bridges or homeless housing, etc. Once the construction workers are laid off, sales at coffee shops and fast-food outlets fall back to pre-stimulus levels.
The surge in employment fades as soon as the funding dries up. Additionally, there is little productivity gain from the infrastructure spending: the repaired bridge performs the same service as the aging bridge.
The problem is this: after the government funding dries up, we still have a corrupt crony-cartel economy based on predatory privilege, parasitic rackets and central-state enforced fraud. In other words, we still have an economy that strangles productivity that could benefit the many in order to further enrich the few.
And as Gail Tverberg and Art Berman have explained, we have an economy that is facing lower energy consumption per capita (per person)--even if oil prices remain around $40/barrel.
Central state stimulus funded by debt only creates a brief illusion of prosperity; it changes nothing in our broken system. All it does is burden a heavily indebted generation with more debt--a generation that cannot afford to consume more because so much of their income is already devoted to debt service.
The other fly in the ointment is this sort of spending doesn't create as many jobs as the uninformed assume. If you stop and look at a bridge being repaired, you'll note the crew is small--in many cases, a half-dozen or less. The same is true of road resurfacing crews and other infrastructure repair work.
You'll also notice the crew has skills that take years to acquire: operating a crane, welding, etc. The unskilled are limited to waving the traffic-control flags.
The same is true of new construction. If you count the workers erecting large new residential buildings, you'll note a few dozen workers on site--and the buildings are finished in a matter of months.
Since on-site construction labor has been more expensive than factory labor for decades, construction fabrication has been pushed to the factory. Beams, walls and other components are assembled at the factory, where wages typically remain between $15 and $20/hour. These components are shipped to the site and assembled by small crews of skilled workers.
Much of the expense in construction is now in the financing (private or public, the interest payments and bond sales fees constitute a large percentage of total construction costs), permits/fees and materials. The actual labor component of major construction/repair work is relatively modest.
It makes no financial sense to hire people with little experience for high-skill tasks. What makes sense is to increase the hours of the experienced workers the contractor already employs. What is the payoff for a contractor to spend three years training neophytes to become productive? That only makes sense if you can keep the trained worker, and the intermittent nature of construction work means your workforce shrinks when demand falls. The worker you trained goes off to work for somebody else.
The beneficiaries of infrastructure stimulus will be workers that already have the requisite skills and experience--Gen X and those Millennials who have completed formal or informal apprenticeships.
But even these workers have to look beyond the few years of infrastructure stimulus, and acquire whatever skills the private sector will need.
As I explain in my book Get a Job, Build a Real Career and Defy a Bewildering Economy, whatever is abundant has little scarcity value: that includes unskilled labor and credentials such as college degrees.
What's scarce are value-creating skillsets, most of which are path-dependent, i.e. they must be accumulated over years of work experience.
What creates value? The ability to solve problems and increase productivity.
If you want to know why the economy and Millennial prospects are both stagnating, just look at productivity--it's tanking:
As I explain in the book, the line between labor and capital is becoming blurred.Capital is increasingly intangible: the most productive forms of capital are human, social and intellectual--the knowledge, experience and networks acquired by people.
In contrast, the return on money--a traditional form of capital--is near-zero.
Owning a credential is not the same as owning skills. If we think of human/social capital as an asset, then we see a new line between labor and capital: labor is low-skilled labor with little scarcity value, and capital is high-skilled human/social capital.
Those without value-creating human/social capital will be mired in a low-wage/minimum wage environment that will make it difficult to escape debt-serfdom. To understand why human/social capital is the most important form of capital, we must understand that this capital asset is fundamentally an enterprise.
If we look at what wealthy households own, we note they own enterprises. This is not a coincidence, as wealth is generated by value-creating enterprises.
If you want to escape Minimum Wage Debt-Serfdom, start by developing skills that create value by solving problems and increasing productivity, which is another way of saying doing more with less.
Understand that your human/social capital is fundamentally an enterprise that you own and manage. Taking ownership of your capital and managing that asset as an enterprise is the first step to escaping stagnation.
Of related interest:
Millennials overtake Baby Boomers as America’s largest generation


My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Tan J.E. ($50), for your marvelously generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Monday, August 29, 2016

Central Banks = Welfare for the Wealthy

Central banks can only do one thing, and that's provide monetary welfare for the wealthy.
The fact that central banks provide welfare for the wealthy is now entering the mainstream. The fact that all central bank policies since 2008 have dramatically increased wealth and income inequality is now grudgingly being accepted as reality by mainstream economists and the financial media.
The central banks' PR facade of noble omniscience on behalf of the great unwashed masses has cracked wide open. Even The Wall Street Journal is publishing critiques of Federal Reserve policies that suggest the Fed has no idea how the U.S. economy actually works because their policies have failed to help the bottom 95%.
The grudging admission that central bank policies have enriched the rich while failing to benefit the bottom 95% is a breakthrough--the stone wall of denial has finally been pierced. The mainstream media and the Establishment have resolutely clung to the self-serving fantasy that the Federal Reserve 1) knows what's it's doing and 2) is boosting a "recovery" that will soon achieve self-sustaining "escape velocity"--that is, the economy will generate its own growth and the Fed can dial back its zero-interest rate policy and all its other unprecedented monetary easing measures.
But like a strung-out junkie that needs ever-stronger injections of smack just to stay alive, the U.S. economy is now totally and completely dependent on central bank heroin to keep from crashing. Rather then wean the economy of central bank largesse, the Fed has made the entire economy dependent on zero interest rates, central bank asset purchases and quantitative easing.
At the mere hint that rates might rise or the Fed might cease buying assets and goosing liquidity, the stock market swoons and every sector that's dependent on cheap, abundant credit faints dead away.
We now have the charade of Chief Heroin Pusher Janet Yellen claiming the addict is "recovering" while she shoves another needle of monetary smack into the comatose U.S. economy. The Fed fantasy was that boosting the wealth of the obscenely wealthy would "trickle down" to the bottom 95% via "the wealth effect"--as stocks and bonds rose in value, households would feel wealthier and happily plunge deeper into debt.
Apparently the hordes of PhDs and "professional" economists in the Fed were incapable of observing that 3/4 of all financial wealth is held by the top 5%: the top 1% owns 43% and the next 4% own another 30%. The upper-middle class owns 15% and the bottom 80% own what little is left: "wealth" such household belongings and equity in homes that can no longer be extracted.
Globally, the top .7% (less than 1%) own 45% of all wealth and the top 8% own 85% of all wealth:
While the spending of the bottom 95% stagnates, spending by the top 5% that have benefited from the Fed's welfare for the rich has soared.
If you glance at this chart, it's no longer a mystery why most of the new jobs in the "recovery" are low-paying service-sector jobs waiting on the top 5%:bussing their dishes in fancy bistros, delivering meals to their luxe condos/homes, walking their dogs, etc.
As for "reforming" the central bank or the status quo--real reform is impossible, as I explain in my book Why Our Status Quo Failed and Is Beyond Reform. All "reform" is just PR cover for more of the same.
Central banks can only do one thing, and that's provide monetary welfare for the wealthy. Now that the central bank has enriched the obscenely wealthy, distorted markets globally and addicted the economy to cheap credit, the servile toadies and lackeys in the mainstream media and the Cargo Cult of economic "professionals" is finally admitting that it was all a fraud, a racket that favored the rich.
Wake up, America. The only way to stop widening wealth and income inequality and kick your smack addiction is to eliminate the pusher.


My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Mark and Charlene S. ($100), for your outrageously generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Sunday, August 28, 2016

Trump By a Landslide?

Based on this analytic structure, Trump may not just win the election in November--he might win by a landslide.
If we believe the mainstream media and the Establishment it protects and promotes, Trump has no chance of winning the presidential election. For starters, Trump supporters are all Confederate-flag waving hillbillies, bigots, fascists and misogynists. In other words, "good people" can't possibly vote for Trump.
Even cartoon character Mike Doonesbury is fleeing to Vancouver to escape Trumpism. (Memo to the Doonesbury family: selling your Seattle home will barely net the down payment on a decent crib in Vancouver.)
For another, Trump alienates the entire planet every time he speaks.
The list goes on, of course, continuing with his lack of qualifications.
But suppose this election isn't about Trump or Hillary at all. Suppose, as political scientists Allan J. Lichtman and Ken DeCell claimed in their 1988 book, Thirteen Keys to the Presidency, that all presidential elections from 1860 to the present are referendums on the sitting president and his party.
If the public views the sitting president's second term favorably, the candidate from his party will win the election. If the public views the sitting president's second term unfavorably, the candidate from the other party will win the election.
(Lichtman published another book on his system in 2008, The Keys to the White House: A Surefire Guide to Predicting the Next President.)
Author/historian Robert W. Merry sorts through the 13 analytic keys in the current issue of The American Conservative magazine and concludes they "could pose bad news for Clinton."
If five or fewer are negative for the incumbent, the incumbent party will win the election. If six or more are negative, the incumbent party loses the election. Merry counts eight negatives for President Obama's second term, which if true spells defeat for the Clinton ticket.
Whether the 13 issues are positive or negative for the candidates is of course open to debate, but consider what it means that Trump won the Republican nomination despite the near-universal opposition of the Establishment.
Consider that some polls found that 68 percent of adults think the country is on the wrong track and a recent average of six polls on the subject concluded that 64% of adults feel the nation is moving in the wrong direction.
This means 2/3 of the nation's adults no longer buy into the Establishment/ mainstream media's narrative that the economy is expanding nicely, things are going in the right direction and Hillary Clinton has a lock on the presidency.
Merry scored the economy as a positive for the incumbent party, but based on the public's view of where the nation is heading, I suspect the reality that the economy is weakening rapidly can no longer be hidden from the voting public. If we score the economy as a negative, that's nine negative keys for the incumbent party, well above the six minimum.
Based on this analytic structure, Trump may not just win the election in November--he might win by a landslide--with landslide usually being defined by an overwhelming advantage in electoral college votes or 60% of the popular vote.
As improbable as this may seem at the moment, consider the improbability of Trump capturing the Republican nomination. Consider the nature of Clinton's support: a mile wide (encompassing the entire Establishment) but only an inch deep.
If the mainstream media has failed to persuade the American public that everything's going in the right direction, why should anyone remain confident that they can persuade the American pubic that Hillary will be their president come heck or high water?
As I have noted before, there are very few ways left to stick your thumb in the eye of the elitist, predatory, self-serving Establishment that won't get you tossed in prison other than voting against their candidate, which in this election is Hillary Clinton.
Memo to Clinton supporters: if you want to persuade the American public the nation is going in the right direction, you'll have to actually change the direction rather than just promise more of the same.


My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Simona R. ($5), for your most generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Saturday, August 27, 2016

What's Been Cooking at Our House? Summer 2016

It's better, cheaper and healthier to just make what you want to eat at home.
One of the core concepts here at oftwominds.com is control what you can. We can't control very much of the world around us, but we can control what we put in our bodies, what fitness we provide our bodies and what thoughts we feed our minds.
As to what food we prepare and put in our bodies: what's been cooking at your house? Here's a semi-random selection of photos of things that have been prepared in our kitchen or gifted to our table by good friends.
Let's start with the healthy stuff and then move to the baked goodies. Here's a salad that is mostly greens from our garden. Note the purslane on top, which "contains more omega-3 fatty acids (alpha-linolenic acid in particular) than any other leafy vegetable plant." Purslane typically grows on its own as a volunteer-- before we knew its health/taste benefits, we pulled it out as a weed (dumb--it's a nutritional powerhouse!).
Art that you can eat! Incredible vegetarian spring rolls, courtesy of our good friends:
Musubi (also known as onigiri) with a piece of fried ono (a type of fish) with stir-fried zucchini and green beans from our garden:
Ulua (a type of fish in Hawaii) sashimi with a Lagunitas IPA beer. Onolicious! (The ulua came from a relative who caught it, and we reciprocated with an ohelo-apple pie--see below.)
The baked goods section starts with collecting (legally) wild ohelo berries.
The ohelo berries being mixed into raw sliced apples.
The mouth-watering result: ohelo-apple pie, with a scoop of ice cream:
When fresh cherries were in season early in the summer, I made a number of clafoutis (claw-foo-tee) to bring to parties and pot-lucks. I love this baked custard dessert because it looks impressive but is easy to prepare:
Our good friend Katharine K. conjured up this amazing homemade strawberry shortcake for a dinner party at our house:
And as a bonus to a family meal shared in Honolulu: a full late-afternoon rainbow:
Many of the things we like to eat are not available elsewhere at any price; no store or bistro makes spring rolls or pies like this on a regular basis. Maybe some $100-per-person restaurant makes an approximation of these dishes from time to time, but who has the time or money to go searching for what may well be inferior to the homemade version?
It's better, cheaper and healthier to just make what you want to eat at home, and give any surplus to those who gift you wonderful ingredients, dishes and treats.


My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
 
Thank you, Rebecca H. ($50), for your superbly generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Thursday, August 25, 2016

China's Great Divide: A New Cultural Revolution?

The only question left for China (and every other debt/bubble-dependent nation) is what socio-political consequences will manifest when the credit bubble finally bursts?
In Asia, it's generally seen as unpatriotic to criticize one's country in public, even if you disagree with its direction and leadership. The cultural norm is to maintain the "face" of one's country by hiding its ills from outsiders.
This reticence is especially evident in China, which suffers from the memory of being subjugated by the Western imperialist powers in the late 19th century and early 20th century.
As a general rule, you will rarely hear any profound criticism of China unless you are considered a trusted friend; giving China a black eye in public is frowned upon, even by its domestic critics.
For this reason, the majority of the Western media has very little grasp of what worries Chinese people. Recently, I have heard fears of a Second Cultural Revolution being expressed in private.
There is a Great Divide between generations in China: on the one side is the older generation that remembers the Maoist era with some nostalgia and the terrible adversities of the Cultural Revolution (1966 - 1976). On the other side is the young educated, prosperous generation which has only known consumerist prosperity and personal advancement.
The ideals of the old communes are an abstraction to the young generation, as are the terrible costs of the Cultural Revolution.
A resurgence of devotion to Mao has caught authorities off-guard; they can't very well suppress public displays of secular worship of the Party's founder, but raising Mao's revolutionary ideals from the dustbin of history implicitly challenges the Party's current leadership.
The older generation resents the young consumer-obsessed generation, and some would like to purge China of the excesses of wealth and consumerism.
It's not too difficult to see how rising unemployment (China's Hidden Unemployment Rate) and China's enormous wealth inequality could spark a new Cultural Revolution that would target Party leaders who have benefited from the state-managed neoliberal capitalism that has greatly enriched the leaders and their family dynasties.
In effect, a return to the party's Maoist roots would open divisive fissures in the Party and the nation. Farfetched? Perhaps not as much as the conventional sugar-coated media representation would suggest.
The status quo solution (in China, the U.S., Japan, the E.U., etc. etc.) to a weakening bubble-dependent economy is to inflate another even bigger bubble.If debt reached extremes that imploded, the solution is to expand debt far beyond the levels that triggered the implosion.
If fudging the numbers triggered a loss of confidence, the solution is to fudge the numbers even more, so they no longer reflect reality at all.
If the masses protest their powerlessness, the solution is to push them further from the centers of power.
And so on.
This blowing new bubbles to replace the ones that popped works for a while, but at the expense of systemic stability. Each new bubble requires pushing the system to new extremes that increase the risk of instability and collapse.
In other words, the stability of the new bubble is temporary and thus illusory.
The processes used to inflate the new bubble suffer from diminishing returns.The nature of stimulus-response is that overuse of the stimulus leads to diminishing responses. This is a structural feature that cannot be massaged away.
Goosing public confidence in the status quo with phony statistics and rigged markets works splendidly the first time, less so the second time, and barely at all the third time. Why is this so? The distance between reality and the bubble construct is now so great that the disconnection from reality is self-evident to anyone not marveling at the finery of the Emperor's non-existent clothing.
The system habituates to the higher stimulus. If the drug/debt has lost its effectiveness, a higher dose is needed. This is the progression of serial bubbles. Then the system habituates to the higher dose/debt, and the next expansion of debt must be even greater.
This dynamic can be visualized as The Rising Wedge Model of Breakdown, which builds on the well-known Ratchet Effect: the system is greased for easy expansion of debt, leverage, employees, etc., but it has no mechanism to allow contraction. Any contraction triggers systemic collapse.
The only question left for China (and every other debt/bubble-dependent nation) is what socio-political consequences will manifest when the credit bubble finally bursts?
The answer will arise from the unique interplay of history, social norms and central-state actions in each nation-state as the crisis deepens. In China, the two revolutions--the Communist victory of 1949 and the now-suppressed Cultural Revolution of 1966 - 1976-- will both loom large--perhaps far larger than the current regime would like.
This essay was drawn from Musings Report 28. The Musings Reports are emailed weekly to subscribers ($5/month) and major contributors ($50+ annually). If you'd like to support this blog, please consider subscribing (links below or in the right sidebar).


My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Catherine C.-F. ($20), for your splendidly generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


Our Privacy Policy:
Correspondents' email is strictly confidential. The third-party advertising placed by Adsense, Investing Channel and/or other ad networks may collect information for ad targeting. Links for commercial sites are paid advertisements. Blog links on the site are posted at my discretion.


Our Commission Policy:
Though I earn a small commission on Amazon.com books and gift certificates purchased via links on my site, I receive no fees or compensation for any other non-advertising links or content posted on my site.

  © Blogger templates Newspaper III by Ourblogtemplates.com 2008

Back to TOP