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The American Conquest of Europe

The New Satellite States

by John Chuckman

CounterPunch Weekend Edition (September 26 to 28 2014)

Russia’s President Putin is reported to have said in a conversation a while back that he could be in Kiev in two weeks. In our press, this was reported as yet more evidence of aggressive intentions, but, given even a moment’s thought, that is a patently false interpretation. It is also further evidence, as if more were needed, of the level of desperation American propaganda around events in Ukraine has reached. It is almost as though America’s intelligence/news media alliance started mimicking the almost forgotten Soviet apparatchiks of decades ago.

Yes, undoubtedly, the Russian military could be in Kiev in a couple of weeks. The very fact that they are not only shows what nonsense we hear from America and the coup-installed government in Ukraine. Clearly, Putin’s words were to the effect,

I wouldn’t have to tolerate the mess on our borders in Ukraine if I truly had aggressive intentions. For goodness sakes, use your brains, I could be in Kiev in two weeks.

This deliberate misinterpretation of a casual statement stands out for me as one of the most pathetic of many pathetic things coming from Western politicians and media. And it is deliberate, for if it were the truth that the intelligence service of a superpower could only interpret statements with such feeble understanding, the world would have entered a new era of extreme danger, with idiots advising the commander who has his finger on the launch button. But I know there’s no genuine danger of that. The interpretation is intended only to shape American public opinion, never very well informed at the best of times. It’s a sound bite not intended to provide real information, just a momentary association of something very negative with the name of Russia’s president, indeed one of a stream of sound bites broadcast recently as though they meant something, as though they were news.

It is a classic method of propaganda, closely related to the technique in advertising of repeating a phrase or slogan or jingle over and over, no matter how silly its actual content is on analysis, and like all the best propaganda, it starts with a truth no matter how insignificant, incompletely reported, and removed from context. But there are two deeply concerning aspects to what otherwise would just be garbage. First, it flows from the writers and editors of what is supposed to be a free and open press, not advertising agencies trying to sell personal hygiene products, and thus demonstrates once more how meaningless is the term, “free and open press”. When the American government has a point to make, even a point that is dishonest or silly, in supporting some ill-conceived and dangerous policy, the entire press instantly enlists to echo it across the land, offering saturation access to the public that could not be bought for millions of dollars. At least in matters of foreign affairs, American journalism does not exist outside the childish fantasies of young journalism students thinking they are going to dig for the truth and serve the right to know once they graduate. You know, the bilge about the press being the fourth branch of government, the tribune of the people, and keeping citizens informed.

But more worrying is why the government or the press in America wishes now to cast aspersions on one of the world’s most important leaders? It has been more than three decades since Russia and the United States were commonly understood as enemies, each capable of obliterating the other. Why would anyone want to look backward to that? And why would anyone deliberately attack a man who has proved himself a sophisticated statesman, one whose words and behaviors show more consistency than those of any of our Western leaders, and especially president Obama who has not spent a day of his time in the White House without killing someone somewhere and surely has matched George Bush for lack of character.

Such cheap propaganda is symptomatic of aggressive intent. I believe the United States’ establishment is starting to feel a new sense of its relative decline in the world, and it is desperate to shore things up by hurting new competitors. The so-called pivot towards China is one of its tactics, and the expansion of NATO right against the face of Russia is another. Both are provocative and risky. And I only wish the world could understand that the United States is not that far from being a de facto bankrupt. It has no money for anything except by the unsound and unethical practice of printing more of it, knowing its special position as a world reserve currency allows it to cheat holders of dollars around the entire planet with their devaluation. And devalue it will, sooner or later, effectively leaving most of the bill for its stupid wars to be paid by others.

Geography and many other factors, such as the distribution of energy and other natural resources, say that Russia and Europe are over the long term destined to be strong, natural economic partners. But the United States has been Europe’s partner –  indeed, a good deal more than a mere partner since World War Two –  and it does not like the prospect of Russia in any way displacing it. It is utterly backward thinking, but we are discussing brains driven by hormones here, not by logic or good will. I recall at an energy conference I attended during the Reagan era meeting a representative from the American State Department whose main message was that we had to stop Russian gas pipelines into Europe. As a believer in people freely buying what they need from others freely selling what they have, I didn’t agree with him and said so, and the people of Europe clearly weren’t convinced because many pipelines exist and many billions of cubic feet of gas flow.

The United States has taken every effort to get some return for its costly investment in a half-failed scheme to destabilize Ukraine, and with each deft move of Russia, it has played the old “look out for the commies” theme, just tarted up a bit so it doesn’t seem laughably out of date. The combination of the expansion of NATO plus scare-mongering about Russia buys some time against what I believe is inevitable. And minds driven only by the hormonal impulse of being dominant –  full-spectrum dominance is the grotesque Washington insider expression –  are incapable of clearly analyzing a situation, regardless of their intelligence and technology and information resources. And they are certainly not capable of acting on behalf of the great basic principles of rights and freedoms with which they sloppily wallpaper their every public statement. They are blind to the chances they take, to the risks they expose all of us to, and to the damage they create for the happiness and prosperity of millions of people.

America’s elaborate dirty tricks in Ukraine were intended to make Russia considerably less secure. You can almost imagine the buzz-cut thugs at Langley having a good laugh over expense-account steaks and martinis when they first thought they had succeeded, the laughter one expects from sociopathic American frat-boys who’ve just played a very dirty joke on someone, as by drugging some poor girl’s drink at a party and raping her. Perhaps the intentions included a plan ultimately to base missiles in Ukraine near Russia’s border, which would be a tremendously provocative act. Certainly it was hoped that gradually Ukraine would become more western-oriented, although the prospect for a poor country like Ukraine, one with shaky democratic credentials and not a good record in human rights, becoming in our lifetime full members of Europe is simply not in the cards. After all, the US keeps pushing for Israel to become part of major European organizations, but that is too much even for some of America’s yes-men in Europe to accept.

Accusing Russia of looking out for what’s happening on her borders isn’t an accusation, it’s what all states do everywhere. Goodness knows the case of Cuba should provide perspective and food for thought. The United States has needlessly hurt that country for half a century with its embargo, many of the chief traditional products of Cuba having been things to satisfy the American markets, such as sugar and tobacco. But an embargo alone was never enough to secure the desired dominance. The United States invaded Cuba with a proxy army of Cuban refugees it trained, supplied, and paid. It tried to assassinate Cuba’s leader, many, many times, and it periodically sent terrorist forces to blow or shoot up things in Cuba. Ships in ports were shot up, hotels were attacked, and an airliner full of people was bombed. When Cuba asked for the return of America’s base at Guantanamo, a base only leased from Cuba originally under duress, the United States simply refused and still illegally occupies the land half a century later.

Of course, America was quite ready to hurl the world into nuclear war when it discovered that the Soviet Union had placed missiles in Cuba as a way both of protecting its ally against new invasions and as increased leverage in dealing with an often inflexible and aggressive United States. The missiles were provocative, but most thinking people felt they were not adequate cause for nuclear war. Fortunately, President Kennedy was able to stand up against the terrible pressures of the military-intelligence establishment and reach a negotiated settlement with Premier Khrushchev, an act which many believe, including this author, later cost him his life in Dallas. Well, all that gives you just some idea of how America responds to what it considers trouble or meddling, even a hundred miles from its border.

We hear the accusation that Russia arms the rebels in Ukraine, as well as the Assad government in Syria. My answer is that America, which spends as much on its military as all others on the planet combined, is also the world’s largest arms dealer as well as a ready covert supplier to groups anywhere it deems as serving its interests, whether extremist groups, including ISIS, set up to destroy Syria or the Nazi-like groups affiliated with Ukraine’s new government and employed in its coup. America runs a virtual conveyor belt of death machines and munitions to Israel to keep it well supplied in upsetting peace throughout the Mideast and suppressing millions of people it took prisoner half a century ago, a situation which has ranked in my view as the world’s most dangerous until now. A great deal of the aggression and repression of Israel have to do with the fact that their best minds recognize the unfavorable situation into which they are locked: no population growth versus high population growth for Arabs, the most highly subsidized national economy in the world affording poorer prospects for most residents than their native places would, an interminable series of wars and repressions and acts which the world sees as atrocities, early dreams all soured by a sense of no way out, and perhaps a sense of having committed a colossal blunder in starting it all.

So in a very real sense, both America and Israel, unwilling or unable to deal with their tremendous problems in a statesmanlike, realistic, and enduring way, dance a hideous danse macabre, with the entire world forced to watch in fear and horror.

When you compare Europe today to, say, Europe of fifty years ago, something more than a little disturbing becomes apparent. Then, despite the height of the Cold War presumably giving reason for greater solidarity with America, there were many independent voices in Europe. France had a consistently strong and decisive voice, and it was determined not to be subservient to NATO. Britain, today perhaps the worst example of subservience to America in all things, also showed independence at critical points, as when it refused to send troops to the holocaust of Vietnam despite great pressure from President Johnson. Today, there are no independent voices, and despite the clear, long-term interests of Europeans in having good relations with Russia, we see country after country acquiesce to America’s demands for destructive sanctions. Even Holland, a country we think of as fair and tough-minded, issued an interim report on the destruction of Malaysian Airlines’ MH17 which told us nothing we already didn’t know. That was clearly at the insistence of the United States, unwilling to see its proxy government in Ukraine revealed for the violent and incompetent operation that it is. NATO, an obsolete organization by any measure, has been expanded, serving primarily the interest of continued American hegemony in Europe, and America pushes the idea of every member spending more on its military. The United States also has Europeans committing to plainly idiotic purchases, as in buying the F-35, a plane one great American fighter jet designer called the worst ever conceived. The plane cannot ever do what it was supposed to do because it was foolishly commissioned to do a bit of almost everything, and the Pentagon wants as many others chipping in to subsidize the immense cost of salvaging something from the wreck. Perhaps the F-35 is emblematic of a conquered Europe, throwing away money on junk because America expects them to do so.

_____

John Chuckman is a former chief economist for a large Canadian oil company, and was a resister during the Vietnam war. He lives in Canada. See http://chuckman.blog.ca/.

http://www.counterpunch.org/2014/09/26/the-american-conquest-of-europe/

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Categories: Uncategorized

What Are Corporate Insiders Seeing …

… that Makes them Dump their Shares Like This?

by Wolf Richter

Wolf Street (September 23 2014)

Merger Monday evokes fond memories of 2007 and 2008, of mega deals breathlessly reported on CNBC, when everything was still possible, until it all fell apart. But mega deals have been gracing the headlines again, and deal volume has soared, and Merger Monday is back. With the hoopla of IPOs and other wondrous events that are part of the daily circus on Wall Street, what could CEOs, officers, and directors possibly be fretting about?

And apparently, they are fretting. Only 7,181 insiders bought shares of their own companies so far this year through September 12, down eight percent from a year ago, while 23,323 sold shares, according to Bloomberg – approaching the worst buy-sell ratio since 2000 {1}.

This insider aversion for their companies’ stock is in sharp contrast to stock buybacks that their companies have undertaken. When it comes to using their own money, insiders have become very bearish, diversifying out of their companies, selling hand over fist. When it comes to using other people’s money, they have no such compunction: corporate share buybacks reached a near record in the first half. And for the trailing twelve months, according to FactSet, buybacks jumped 29% to $539 billion {2}.

But insiders know this pace of buybacks isn’t sustainable: free cash flow declined 0.5% while the ratio of buybacks to free cash flow rose to 82%, the highest since, well, Q3 2008. And so in Q2, buybacks actually plunged 27% from Q1, according to Capital IQ {3}. Alas, buybacks – that $539 billion over twelve months! –  have been one of the most important pillars of the stock market rally.

Nothing good happens to stocks when such large, relentless, price-insensitive buyers walk away from the market. Corporate insiders are the first to see when that happens. They don’t have to wait till others gather up the numbers the hard way to release them months behind reality. Insiders know this in advance!

These insiders are also seeing that sales growth in the US has been averaging a mere 2.6% over the last two years, barely above the rate of inflation. GDP has been growing at a languid 2.1% since the Great Recession, never gaining the escape velocity that economists had promised five years in a row. But stocks soared! And insiders might have been scratching their heads about the valuations of their own stocks.

Frank Calderoni, CFO of buyback queen Cisco – which had announced $15 billion in share repurchases late last year – dumped 120,000 shares in September (excluding options-related and automatic sales), Bloomberg reported, the first sale since his eerily prescient sale in 2008.

The stated reason is always the same corporate speak about following “widespread financial advice to diversify their personal portfolios”. But Calderoni wasn’t the only insider who knew when to sell.

Company officials turned pessimistic on their own stock in October 2010, with about seven insiders selling for every two that bought shares. The ratio exceeded three for five straight months, the longest stretch in a decade. The S&P 500 peaked in April 2011 and slumped nineteen percent through October, the closest the market has come to ending the bull market.

Executives became optimistic at the end of the financial crisis six years ago. The number of buyers almost tripled that of sellers in November 2008 and stayed higher in each of the following four months. The S&P 500 bottomed at a twelve-year low in March 2009.

So they were early, but they were right.

And what else do Calderoni and his ilk know this time? They know first-hand that the buyback frenzy is supported by a credit bubble of historic proportions, and it includes a bond bubble that has spread across much of the world, with even the most dubious government bonds yielding below the rate of inflation, or zero, or even below zero, and even junk bonds yielding so little as to practically guarantee investors a loss over time.

“Bonds are at ridiculous levels”, explained founder of Tiger Management, Julian Robertson, at the Bloomberg Markets Most Influential Summit on Monday {4}. It was “a worldwide phenomenon that governments are buying bonds to keep their countries moving along economically”, he said. A phenomenon that would end “in a very bad way”.

“Very overvalued” is how Omega Advisors founder Leon Cooperman called bonds at the summit. Howard Marks, chairman of Oaktree Capital Group, mused: “If you participate in that enthusiasm, then you’ll also participate in the correction”.

Even the Fed, after years of denying the existence of bubbles, or their visibility if they did indeed exist, is now trying to see bubbles as part of its job under the doctrine of maintaining “financial stability”. So they have created a “financial stability” panel, led by Vice Chair Stanley Fischer. Even super-dove and passionate bubble-blower, New York Fed President William Dudley, is on board. “I think we do need to try to identify asset bubbles in real time”, he told Bloomberg. “You can’t have an effective monetary policy if you have financial instability”. {5}

And these folks at the Fed are seeing the ballooning credit bubble, which includes the bond bubble and the nearly free cash it produced for corporations, cash that supported the near record share buybacks and dividends, which contributed to the soaring stock market. And the Fed, nervous about that credit bubble, nervous that it might implode and cause financial instability, put its hand on the spigot and started turning.

That’s what corporate insiders are seeing. And they’re seeing what’s going on at their companies, and they’re wondering about the sky-high valuations powered by juice that is getting turned off, and so they’ve been dumping shares in their own companies. Once again, they’re early, but the last few times, they were right.

Obscured by the stock market hoopla, and under the leadership of our fearless Treasury Secretary Jack Lew, the G-20 finance honchos fretted about faltering global growth. Read {6}.

Links:

{1} http://www.bloomberg.com/news/2014-09-22/insider-buying-dries-up-defying-275-billion-of-buybacks.html

{2} http://www.factset.com/websitefiles/PDFs/buyback/buyback_9.17.14

{3} http://www.zerohedge.com/news/2014-09-09/buyback-party-indeed-over-stock-repurchases-tumble-second-quarter

{4} http://www.bloomberg.com/news/2014-09-22/tiger-s-robertson-says-bond-bubble-will-end-in-very-bad-way-.html

{5} http://www.bloomberg.com/news/2014-09-22/dudley-says-financial-stability-definitely-on-fed-s-radar.html

{6} http://wolfstreet.com/2014/09/19/ok-i-get-it-things-are-coming-unglued/

http://wolfstreet.com/2014/09/23/what-are-corporate-insiders-seeing-that-makes-them-dump-their-shares-like-this/

Categories: Uncategorized

Japan’s Social Depression

2014/09/29 1 comment

Global Bellwether

by Charles Hugh Smith

Of Two MInds (September 25 2014)

Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression.

This week I’ve highlighted the structural flaws of using GDP as a measure of “growth” and prosperity: GDP = Waste {1} and What Metric Are We Optimizing For? {2}

The conventional metrics of “growth” and prosperity have another fatal flaw: they do not recognize, much less measure, social depression, the social costs of economic stagnation and wealth inequality driven by financialization.

The term social recession has two distinct meanings: around 2000, the term was used to describe the erosion of social cohesion via the decline of institutions such as marriage and the rise of social problems such as teen pregnancy.

Many commentators pinned this erosion of social constraints and bonds on rampant individualism and overstimulated consumerism, while others pointed to urbanization, the commodification of child care, and women entering the workforce en masse to prop up household incomes. Poverty was explicitly rejected as a causal factor, hence the term “social recession”.

This concept of social recession was aptly described by Robert E Lane, author of the book The Loss of Happiness in Market Democracies (2001):

There is a kind of famine of warm interpersonal relations, of easy-to-reach neighbors, of encircling, inclusive memberships, and of solidary family life … For people lacking in social support of this kind, unemployment has more serious effects, illnesses are more deadly, disappointment with one’s children is harder to bear, bouts of depression last longer, and frustration and failed expectations of all kinds are more traumatic.

I use the term social recession to describe a very different phenomenon: the social and cultural consequences of structurally stagnant economies such as Japan, Europe and the US. I have defined and used social recession in this way since 2010 {3}.

Here are the conditions that characterize social recession:

1. High expectations of endless rising prosperity have been instilled in generations of citizens as a birthright.

2. Part-time and unemployed people are marginalized, not just financially but socially.

3. Widening income/wealth disparity as those in the top ten percent pull away from the shrinking middle class.

4. A systemic decline in social/economic mobility as it becomes increasingly difficult to move from dependence on the state (welfare) or one’s parents to financial independence.

5. A widening disconnect between higher education and employment: a college/university degree no longer guarantees a stable, good-paying job.

6. A failure in the Status Quo institutions and mainstream media to recognize social recession as a reality.

7. A systemic failure of imagination within state and private-sector institutions on how to address social recession issues.

8. The abandonment of middle class aspirations by the generations ensnared by the social recession: young people no longer aspire to (or cannot afford) consumerist status symbols such as luxury autos or homeownership.

9. A generational abandonment of marriage, families and independent households as these are no longer affordable to those with part-time or unstable employment, that is what I have termed (following Jeremy Rifkin) The End of Work.

10. A loss of hope in the young generations as a result of the above conditions.

At some threshold of structural denial, social recession becomes social depression: a black hole of deteriorating social mobility and opportunity for the younger generations.

I have covered these topics in depth for many years {3, 4, 5, 6, 7, 8, 9, 10}.

What I want to focus on is the willful blindness of official metrics such as GDP, household wealth and unemployment to the realities of social depression, and how these metrics can continue to register gains while the younger generations of workers sink deeper and deeper into full-blown social depression.

Japan has been running a 25-year long experiment in precisely this dynamic: obliterating official recognition with metrics designed to ignore the inconvenient realities of social depression. Beneath the surface wealth of Japan, homeless encampments are expanding even as opportunities for young workers decline.

If the protected class that currently reaps most of the benefits of the Status Quo and owns most of the household wealth becomes even wealthier, this is logged by official metrics as “expansion”, that is prosperity, even when this “prosperity” is limited to the financial/political Elites and the Upper Caste of the Japanese economy – what another author calls the Clerisy Class {11}.

The Clerisy Class is not unique to America; every structurally stagnant economy is being strangled by its protected Upper Caste.

The Status Quo also masks these realities with tsunamis of upbeat consumerist propaganda. In Japan, this propaganda manifests as ceaseless media coverage of young people with enough time and disposable income to indulge in absurdly exaggerated fashions and fads.

If all this is new to you, I strongly recommend you read {3}.

Here are a few highlights:

* Once-egalitarian Japan is becoming a nation of haves and have-nots.

* More than one-third of the workforce is part-time as companies have shed the famed Japanese lifetime employment system.

* The slang word “freeter” (for part-time worker) combines the English “free” and the German “arbeiter” or worker.

* A typical “freeter” wage is 1,000 yen ($9.20) an hour.

* As long ago as 2001, The Ministry of Health, Labor and Welfare estimated that fifty percent of high school graduates and thirty percent of college graduates now quit their jobs within three years of leaving school.

* Japan’s slump has lasted so long, a “New Lost Generation” is coming of age {12}, joining Japan’s first “Lost Generation” which graduated into the bleak job market of the 1990s.

* These trends have led to an ironic moniker for the Freeter lifestyle: Dame-Ren (No Good People) {13}. The Dame-Ren (pronounced dah-may-ren) get by on odd jobs, low-cost living and drastically diminished expectations.

* Many young men now reject the macho work ethic and related values of their fathers. These “herbivores” reject the traditonal Samurai ideal of masculinity. Derisively called “herbivores” or “Grass-eaters”, these young men are uncompetitive and uncommitted to work, evidence of their deep disillusionment with Japan’s troubled economy.

* These shifts have spawned a disconnect between genders so pervasive that Japan is experiencing a “social recession” in marriage, births, and even sex, all of which are declining.

* The trend of never leaving home has sparked an almost tragicomical countertrend of Japanese parents who actively seek mates to marry off their “parasite single” offspring as the only way to get them out of the house.

* An even more extreme social disorder is Hikikomori, or “acute social withdrawal”, a condition in which the young live-at-home person will virtually wall themselves off from the world by never leaving their room.

Is it any wonder that in the face of such a bleak and maladaptive future, young people seek identity, community and solace in a fantasy world of fashion? When an economy is dominated by a Savior State that issues unsustainable promises, and a society is dependent on a consumerist frenzy of fads, status signifiers and shopping for identity and what passes for community, then narcissism, restless emptiness and the aloneness described in {3} are the inevitable results.

Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression.

Japan is the global bellwether in social depression, and we can already see the same symptoms and official panic to mask these symptoms in Europe, China and the US.

Links:

{1} http://www.oftwominds.com/blogsept14/GDP9-14.html

{2} http://www.oftwominds.com/blogsept14/metric9-14.html

{3} http://www.oftwominds.com/blogaug10/Japan-lost-generations08-10.html

{4} http://www.oftwominds.com/blogaug13/social-recession8-13.html

{5} http://www.oftwominds.com/blogoct12/upward-mobility10-12.html

{6} http://www.oftwominds.com/blogoct12/end-of-growth10-12.html

{7} http://www.oftwominds.com/blogoct12/exhaustion-consumerism10-12.html

{8} http://www.oftwominds.com/blogoct12/new-type-depression10-12.html

{9} http://www.oftwominds.com/blogoct12/Japan-economy10-12.html

{10} http://www.oftwominds.com/blogoct12/Japan-budget10-12.html

{11} http://www.usatoday.com/story/opinion/2014/09/09/middle-class-mobility-oligarchs-wealth-distribution-column/15249645/

{12} http://blogs.wsj.com/japanrealtime/2010/06/29/jobless-youth-a-new-lost-generation/

{13} https://www.adbusters.org/magazine/80/japan_no_good_people.html

{14} http://www.independent.co.uk/news/world/asia/japans-generation-xx-1704155.html

{15} http://www.usatoday.com/news/world/2004-06-02-japan-women-usat_x.htm

{16} http://http//www.independent.co.uk/news/world/asia/japanese-parents-marry-off-parasite-single-offspring-907229.html

{17} http://en.wikipedia.org/wiki/Hikikomori

{18} http://www.oftwominds.com/blogoct12/new-type-depression10-12.html

http://www.oftwominds.com/blogsept14/Japan-depression9-14.html

Categories: Uncategorized

Listen to the Slowing US Economy …

2014/09/29 2 comments

… Hear Echoes of Japan

Fabius Maximus (September 24 2014)

Summary: Now in its sixth year, this sorry excuse for an expansion is ready to boom – accelerating to “escape velocity” – according to many economists. Or perhaps the boom grows old, even sclerotic, so we should start watching for the next recession. The consensus of economists never sees a recession until it begins, so we’ll have to find other ways to look ahead. This post describes one such: the economy slowing to its “stall speed”. This alarm might be flashing yellow, or even red, now.

http://fabiusmaximus.files.wordpress.com/2014/09/recession.jpg?w=413&h=309
A warning. AP Photo/Mark Lennihan

Contents

(1) Echoes of Japan
(2) What is “stall speed”?
(3) One reason we don’t grow
(4) For More Information

(1)  “Echoes of Japan” {1}

Economic Cycle Research Institute (ECRI), September 22 2014 – Opening:

In 2011 the Fed published a study aimed at identifying “particular values for output growth and other variables, such that when these values are reached during an expansion, the economy has tended to move into a recession within a fairly short time span”.

The study concluded that Gross Domestic Income (GDI) –  which, while income-based, is theoretically identical to Gross Domestic Product (GDP) –  “provides a better measure of output growth than GDP”, and identified a two-quarter annualized real GDI growth rate of two percent to be the “stall speed” threshold.

…  this GDI growth measure (see chart) has now stayed below the two percent “stall speed” threshold for three straight quarters starting in Q4 2013, which is much longer than the duration of the harsh winter weather …

Real GDI crashed below two percent Seasonally Adjusted Annual Rate (SAAR) in Q2 2006. Before this cycle, since 1947 real GDI had fallen below two percent only once in a period not associated with a recession –  in Q1 1993. Real GDI is now below two percent year over year. For the past three quarters (and four of past five quarters) it’s been below two percent SAAR on a quarter over quarter basis.

(2)  What is Stall Speed?

The concept of a “stall speed” is that the economy slows in the year before falling into a recession, and there is a critical speed below which the economy is likely to fall into recession.

The idea of a “stall speed” became known after a 2011 Fed paper by Jeremy J Nalewaik {2}, who showed that it predicted recessions better than other methods – and better than the Blue Chip Economists’ Forecast.  It appears seldom in Fed research after several other articles in 2011, such as these by the Cleveland Fed {3} and the Atlanta Fed {4}.

On the other hand, several studies have been skeptical about the concept, such as this 2012 BIS working paper {5} which questioned even the aeronautical analogy.

…  perhaps the slowing economy is like a gliding aircraft. There is insufficient power for the aircraft to overcome the force of gravity, but the wings are experiencing normal lift and flight control is not compromised. There is no fundamental change in underlying economic relationships in the economy as the growth rate falls. Maybe it takes time for a change in pilot inputs, in the form of fiscal policy and monetary policy, to influence the speed of the aircraft, so that the inevitable shocks to the flight path see the aircraft’s altitude decrease before rising again, creating the business cycle.

But no matter whether or not the economy has a “stall speed”, we’re growing slower than we should. Unless something changes, we look more like Japan with each passing year (see Section 4 for details).  This is our sorry excuse for an expansion (growth of two percent per year is slightly under 0.5% per quarter):

http://fabiusmaximus.files.wordpress.com/2014/09/01042014-gdi.jpg?w=825&h=548

Look to our past to see what strong cycles look like, with growth of one percent to 1.5% per quarter during the expansion. This is what America has done, and can do again.

http://fabiusmaximus.files.wordpress.com/2014/09/01042014-gdi-long.jpg?w=900&h=599

(3)  One Reason We Can’t Grow

There are many factors at work, such as an aging and more slowly growing population, cancer-like expansion of the financial sector, and increasingly bureaucratic (even dysfunctional) sciences (described in this post). Here’s a technical analysis of the problem: {6}.

But one might play a large and under-appreciated role: the discovery by corporate senior executives that it pays better to strip-mine their corporations than build them. Cut R&D and capital expenditures, borrow, then blow the money buying back the company’s stock (watch your stock and options grow). Slowly it’s getting the attention such a serious problem deserves.

* “Unless the roots of the problem are fixed, boardrooms will keep on draining their treasuries” {7}

* For a detailed look at the the strip-mining of American business see {8}.

(4)  For More Information

(a) The big question: {9}

(b) Other posts about “stall speed”: {10, 11}

(c)  Other posts about corporations under-investing in themselves: {12, 13, 14, 15}

Links:

{1} https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-echoes-of-japan

{2} http://www.federalreserve.gov/pubs/feds/2011/201124/201124pap.pdf

{3} http://www.clevelandfed.org/research/trends/2011/0911/01gropro.cfm

{4} http://macroblog.typepad.com/macroblog/2011/08/is-eco%20nomy-hitting-stall-speed.html

{5} http://www.bis.org/publ/work387.pdf

{6} http://equitablegrowth.org/2014/09/22/potential-output-total-factor-productivity-since-2000-marking-beliefs-market-honest-broker-week-september-26-2014/

{7} http://www.ft.com/intl/cms/s/0/f098df90-3fef-11e4-936b-00144feabdc0.html#axzz3EC9xMKtB

{8} http://www.factset.com/websitefiles/PDFs/buyback/buyback_9.17.14

{9} http://fabiusmaximus.com/2013/11/18/inflation-qe-monetary-58539/

{10} http://fabiusmaximus.com/2014/07/09/us-economy-growth-stall-speed-ecri-69794/

{11} http://fabiusmaximus.com/2014/07/10/economic-growth-coffin-corner-lombard-street-research-69785/

{12} http://fabiusmaximus.com/2013/01/28/stagnation-48322/

{13} http://fabiusmaximus.com/2013/02/14/fiscal-infrastructure-deficit-48852/

{14} http://fabiusmaximus.com/2013/11/01/america-investment-infrastructure-57912/

{15} http://fabiusmaximus.com/2014/04/18/corporate-decline-capex-67412/

http://fabiusmaximus.com/2014/09/24/economy-japan-gdi-72126/

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What the Global Status Quo Optimizes

Protecting Elites and the Clerisy Class That Serves Them

by Charles Hugh Smith

Of Two Minds (September 25 2014)

The incestuous embrace of privilege and power by entrenched, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history.

Every system is optimized to serve a specific purpose. As noted in my recent essay What Metric Are We Optimizing For? {1}, what the system optimizes is rarely explicitly stated.

Sometimes this results from not understanding the metric that the system is designed to optimize; but in other cases, explicitly describing what the system optimizes would trigger social instability.

The Status Quo around the world – from France to China to the US – is optimized to protect its Elites and the sprawling Upper-Caste of academics, managers, think-tank toadies, technocrats, apparatchiks, functionaries, factotums, lackeys and apologists who serve the Elites, and are well-paid for enforcing the Status Quo on the disenfranchized castes below.

Demographer Joel Kotkin, author of the new book The New Class Conflict (2014), has coined the word Clerisy to describe what I have been calling the Upper Caste: America’s new class system {2}.

Oligarchs are assisted in their control by what Kotkin calls the “clerisy” class – an amalgam of academics, media and government employees who play the role that medieval clergy once played in legitimizing the powerful, and in implementing their policies while quelling resistance from the masses. The clerisy isn’t as rich as the oligarchs, but it does pretty well for itself and is compensated in part by status, its positions allowing even its lower-paid members to feel superior to the hoi polloi.

Because it doesn’t have to work in competitive industries, the clerisy favors regulations, land-use rules and environmental restrictions that make things worse for businesses – especially the small “yeoman” businesses that traditionally sustained much of the middle class – thus further hollowing out the middle of the income distribution. But the lower classes, sustained by government handouts and by rhetoric from the clerisy, provide enough votes to keep the machine running, at least for a while.

This describes the Savior State perfectly: a centrally planned and controlled government that enforces its absolute control via force, legal regulations and the blandishments of complicity: there’s billions of dollars in free money social welfare to buy the loyalty (or at least the passivity) of the disenfranchised and marginalized.

I have often written about the stagnation of social mobility and the rise of a neofeudal arrangement of social-economic strata {3, 4, 5, 6, 7):

The political, corporate/financial and National Security State Elites represent a vanishingly thin layer of the American economy and society. America today is the nightmare scenario feared by James Madison and other Federalists: a covertly created monarchical (what I term neofeudal) empire much like the Roman Empire – a republic in name but in reality a highly centralized Empire operated for the benefit of tiny Elites who buy complicity of the masses with free bread and circuses.

The “Monarchical Federalists” Madison and Jefferson feared have indeed established a neofeudal, neocolonialist Empire.

In this context, it is interesting to note that fully twenty percent of all entitlements (tax credits, Medicare, Social Security, et cetera) flows to the top ten percent, 58% goes to middle-income households and 32% goes to the bottom twenty percent. The swag of bread and circuses is remarkably well-distributed, buying off every sector of the populace.

Behind the PR facade of democracy and free-market capitalism, a parasitic Aristocracy extracts income and wealth from a financially indentured class of serfs. This Aristocracy is composed of several Elites which are served by the Upper Caste of technocrats. These Elites and the Upper Caste serve each others interests, a social hierarchy that Hilton Root characterized as a “society divided into closed, self-regarding groups”. The slow trickle of the “best and brightest” into the Upper Caste via Ivy League university admission is also a propaganda facade, as Ron Unz ably and exhaustively proves in The Myth of American Meritocracy: How corrupt are Ivy League admissions? (2012)

The trick is enable just enough meritocracy to support the PR facade. The Ivy League has mastered that balancing act.

These Elites have few if any links to the social layers below. Charles Murray spoke to some aspects of this trend of financial/social Elitist isolation from the debt-serfs and worker-bee class below in Coming Apart: The State of White America, 1960-2010 (2012, but the key dynamic that is outside Murray’s sociological purview is the stark reality that the Elite class is devoid of any real feeling for or interest in the common good or public weal.

That is, not only have the key institutions of American governance and power lost the memory and mechanics of good governance, the Elites running the institutions have become an inbred neofeudal Aristocracy characterized by an unexamined (and thus deeply adolescent) sense of entitlement to the reins of power and control of the national income.

It’s not just the institutions that have lost any conception of good governance – the Aristocracy ruling the nation has lost all interest or recognition of the common good. This is of course not unique to America; the same disregard for the common good is at the root of all developed-world and developing-world failed states.

The incestuous embrace of privilege and power by entrenched, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history.This is what the Status Quo everywhere is optimized for: protecting those who have secured the wealth, perquisites and power by strangling competition, democracy and social mobility.

If you want to pinpoint the one dynamic pushing the global economy into not just a prolonged recession but a parallel period of massive social instability, look no farther than the social and financial stagnation that results from optimizing the system to benefit the Elites and the entrenched incumbents who protect them from competition and the dispossessed debt-serf classes below.

Links:

{1} http://www.oftwominds.com/blogsept14/metric9-14.html

{2} http://www.usatoday.com/story/opinion/2014/09/09/middle-class-mobility-oligarchs-wealth-distribution-column/15249645/

{3} http://www.oftwominds.com/blogapr14/new-classes4-14.html

{4} http://www.oftwominds.com/blogoct12/three-classes10-12.html

{5} http://www.oftwominds.com/blogjan12/american-divide01-12.html

{6} http://www.oftwominds.com/blogfeb13/reform-wont-work2-13.html

{7} http://www.oftwominds.com/blogmar08/belief-fades.html

http://charleshughsmith.blogspot.jp/2014/09/what-global-status-quo-optimizes.html

Categories: Uncategorized

Will Russia and China Hold Their Fire …

2014/09/28 1 comment

… Until War is the Only Alternative?

by Paul Craig Roberts

Institute for Political Economy (September 25 2014)

Obama’s September 24 speech at the UN is the most absurd thing I have heard in my entire life. It is absolutely amazing that the president of the United States would stand before the entire world and tell what everyone knows are blatant lies while simultaneously demonstrating Washington’s double standards and belief that Washington alone, because the US is exceptional and indispensable, has the right to violate all law.

It is even more amazing that every person present did not get up and walk out of the assembly.

The diplomats of the world actually sat there and listened to blatant lies from the world’s worst terrorist. They even clapped their approval.

The rest of the speech was just utter bullshit: “We stand at a crossroads”, “signposts of progress”, “reduced chance of war between major powers”, “hundreds of millions lifted from poverty”, and while ebola ravages Africa “we’ve learned how to cure disease and harness the power of the wind and the sun”. We are now God. “We” is comprised of the “exceptional people” – Americans. No one else counts. “We” are it.

It is impossible to pick the most absurd statement in Obama’s speech or the most outrageous lie. Is it this one? “Russian aggression in Europe recalls the days when large nations trampled small ones in pursuit of territorial ambition”.

Or is it this one? “After the people of Ukraine mobilized popular protests and calls for reform, their corrupt president fled.  Against the will of the government in Kiev, Crimea was annexed.  Russia poured arms into eastern Ukraine, fueling violent separatists and a conflict that has killed thousands.  When a civilian airliner was shot down from areas that these proxies controlled, they refused to allow access to the crash for days.  When Ukraine started to reassert control over its territory, Russia gave up the pretense of merely supporting the separatists, and moved troops across the border.”

The entire world knows that Washington overthrew the elected Ukrainian government, that Washington refuses to release its satellite photos of the destruction of the Malaysian airliner, that Ukraine refuses to release its air traffic control instructions to the airliner, that Washington has prevented a real investigation of the airliner’s destruction, that European experts on the scene have testified that both sides of the airliner’s cockpit demonstrate machine gun fire, an indication that the airliner was shot down by the Ukrainian jets that were following it. Indeed, there has been no explanation why Ukrainian jets were close on the heels of an airliner directed by Ukrainian air traffic control.

The entire world knows that if Russia had territorial ambitions, when the Russian military defeated the American trained and supplied Georgian army that attacked South Ossetia, Russia would have kept Georgia and reincorporated it within Russia where it resided for centuries.

Notice that it is not aggression when Washington bombs and invades seven countries in thirteen years without a declaration of war. Aggression occurs when Russia accepts the petition of Crimeans who voted 97 percent in favor of reuniting with Russia where Crimea resided for centuries before Khrushchev attached it to the Soviet Socialist Republic of Ukraine in 1954 when Ukraine and Russia were part of the same country.

And the entire world knows that, as the separatist leader of the Donetsk Republic said, “If Russian military units were fighting with us, the news would not be the fall of Mariupol but the fall of Kiev and Lviv”.

Which is “the cancer of violent extremism” – ISIS which cut off the heads of four journalists, or Washington which has bombed seven countries in the 21st century murdering hundreds of thousands of civilians and displacing millions?

Who is the worst terrorist – ISIS, a group that is redrawing the artificial boundaries created by British and French colonialists, or Washington with its Wolfowitz Doctrine, the basis of US foreign policy, which declares Washington’s dominant objective to be US hegemony over the world?

ISIS is the creation of Washington. ISIS consists of the jihadists Washington used to overthrow Gaddafi in Libya and then sent to Syria to overthrow Assad. If ISIS is a “network of death”, a “brand of evil” with which negotiation is impossible as Obama declares, it is a network of death created by the Obama regime itself. If ISIS poses the threat that Obama claims, how can the regime that created the threat be credible in leading the fight against it?

Obama never mentioned in his speech the central problem that the world faces. That problem is Washington’s inability to accept the existence of strong independent countries such as Russia and China. The neoconservative Wolfowitz Doctrine commits the United States to maintaining its status as the sole Unipower. This task requires Washington “to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power”. A “hostile power” is any country that has sufficient power or influence to be able to limit Washington’s exercise of power.

The Wolfowitz Doctrine explicitly targets Russia: “Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere”. A “rival” is defined as any country capable of defending its interests or those of allies against Washington’s hegemony.

In his speech, Obama told Russia and China that they can be part of Washington’s world order on the condition that they accept Washington’s hegemony and do not interfere in any way with Washington’s control. When Obama tells Russia that the US will cooperate with Russia “if Russia changes course”, Obama means that Moscow must accept the primacy of Washington’s interest over Russia’s own interest.

Clearly, this is an inflexible and unrealistic position. If Washington keeps to it, war with Russia and China will ensue.

Obama told China that Washington intended to continue to be a Pacific power in China’s sphere of influence, “promoting peace, stability, and the free flow of commerce among nations” by building new US air and naval bases from the Philippines to Vietnam so that Washington can control the flow of resources in the South China Sea and cut off China at will.

As far as I can tell, neither the Russian nor Chinese governments understand the seriousness of the threat that Washington represents. Washington’s claim to world hegemony seems too farfetched to Russia and China to be real. But it is very real.

By refusing to take the threat seriously, Russia and China have not responded in ways that would bring an end to the threat without the necessity of war.

For example, the Russian government could most likely destroy NATO by responding to sanctions imposed by Washington and the EU by informing European governments that Russia does not sell natural gas to members of NATO. Instead of using this power, Russia has foolishly allowed the EU to accumulate record amounts of stored natural gas to see homes and industry through the coming winter.

Has Russia sold out its national interests for money?

Much of Washington’s power and financial hegemony rests on the role of the US dollar as world reserve currency. Russia and China have been slow, even negligent from the standpoint of defending their sovereignty, to take advantage of opportunities to undermine this pillar of Washington’s power. For example, the BRICS’ talk of abandoning the dollar payments system has been more talk than action. Russia doesn’t even require Washington’s European puppet states to pay for Russian natural gas in rubles.

One might think that a country such as Russia experiencing such extreme hostility and demonization from the West would at least use the gas sales to support its own currency instead of Washington’s dollar. If the Russian government is going to continue to support the economies of European countries hostile to Russia and to prevent the European peoples from freezing during the coming winter, shouldn’t Russia in exchange for this extraordinary subsidy to its enemies at least arrange to support its own currency by demanding payment in rubles? Unfortunately for Russia, Russia is infected with Western trained neoliberal economists who represent Western, not Russian, interests.

When the West sees such extraordinary weakness on the part of the Russian government, Obama knows he can go to the UN and tell the most blatant lies about Russia with no cost whatsoever to the US or Europe. Russian inaction subsidizes Russia’s demonization.

China has been no more successful than Russia in using its opportunities to destabilize Washington. For example, it is a known fact, as Dave Kranzler and I have repeatedly demonstrated, that the Federal Reserve uses its bullion bank agents to knock down the gold price in order to protect the dollar’s value from the Federal Reserve’s policies. The method used is for the bullion banks to drive down the gold price with enormous amounts of naked shorts during periods of low or nonexistent volume.

China or Russia or both could take advantage of this tactic by purchasing every naked short sold plus all covered shorts, if any, and demanding delivery instead of settling the contracts in cash. Neither New York Comex nor the London market could make delivery, and the system would implode. The consequence of the failure to deliver possibly could be catastrophic for the Western financial system, but in the least it would demonstrate the corrupt nature of Western financial institutions.

Or China could deal a more lethal blow. Choosing a time of heightened concern or disruptions in US financial markets, China could dump its trillion dollar plus holdings of US treasuries, or indeed all its holdings of US financial instruments, on the market. The Federal Reserve and the US Treasury could try to stabilize the prices of US financial instruments by creating money with which to purchase the bonds and other instruments. This money creation would increase concern about the dollar’s value, and at that point China could dump the trillion dollars plus it receives from its bond sales on the exchange market. The Federal Reserve cannot print foreign currencies with which to buy up the dollars. The dollar’s exchange value would collapse and with it the dollar’s use as world reserve currency. The US would become just another broke country unable to pay for its imports.

Possibly, Washington could get Japan and the European Central Bank to print enough yen and euros to buy up the dumped dollars. However, the likelihood is that this would bring down the yen and euro along with the dollar.

Flight would occur into the Chinese and Russian currencies, and financial hegemony would depart the West.

By their restraint, Russia and China enable Washington’s attack upon them. Last week Washington put thousands of its NGO operatives into the Moscow streets protesting “Putin’s war against Ukraine”. Foolishly, Russia has permitted foreign interests to buy up its newspapers, and these interests continually denounce Putin and the Russian government to their Russian readers.

Did Russia sell its soul and communication system for dollars? Did a few oligarchs sell out Russia for Swiss and London bank deposits?

Both Russia and China have Muslim populations among whom the CIA operates encouraging disassociation, rebellion, and violence. Washington intends to break up the Russian Federation into smaller, weaker countries that could not stand in the way of Washington’s hegemony. Russian and Chinese fear of discord among their own Muslim populations have caused both governments to make the extremely serious strategic mistake of aligning with Washington against ISIS and with Washington’s policy of protecting Washington’s status quo in the Muslim world.

If Russia and China understood the deadly threat that Washington presents, both governments would operate according to the time honored principle that “the enemy of my enemy is my friend”. Russia and China would arm ISIS with surface to air missiles to bring down the American planes and with military intelligence in order to achieve an American defeat. With defeat would come the overthrow of Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Jordan, Egypt and all of the American puppet rulers in the area. Washington would lose control over oil, and the petro-dollar would be history. It is extraordinary that instead Russia and China are working to protect Washington’s control over the Middle East and the petro-dollar.

China is subject to a variety of attacks. The Rockefeller Foundation creates American agents in Chinese universities, or so I am informed by Chinese academics. American companies that locate in China create Chinese boards on which they place the relatives of local and regional party officials. This shifts loyalty from the central government to the American money. Moreover, China has many economists educated in the US who are imbued with the neoliberal economics that represents Washington’s interests.

Both Russia and China have significant percentages of their populations who wish to be western. The failure of communism in both countries and the success of American cold war propaganda have created loyalties to America in place of their own governments. In Russia they go by the designation “Atlanticist Integrationists”. They are Russians who wish to be integrated into the West. I know less about the Chinese counterpart, but among youth Western materialism and lack of sexual restraint is appealing.

The inability of the Russian and Chinese governments to come to terms with the threat posed to their existence as sovereign countries by the neoconservative insistence on American world hegemony makes nuclear war more likely. If Russia and China catch on too late in the game, their only alternative will be war or submission to Washington’s hegemony. As there is no possibility of the US and NATO invading and occupying Russia and China, the war would be nuclear.

To avoid this war, which, as so many experts have shown, would terminate life on earth, the Russian and Chinese governments must soon become far more realistic in their assessment of the evil that resides in what Washington has turned into the world’s worst terrorist state – the US.

It is possible that Russia, China, and the rest of the world will be saved by American economic collapse. The US economy is a house of cards. Real median family incomes are in long-term decline. Universities produce graduates with degrees and heavy debts but no jobs. The bond market is rigged by the Federal Reserve which necessitates rigging the bullion markets in order to protect the dollar. The stock market is rigged by the outpouring of money from the Federal Reserve, by the Plunge Protection Team, and by corporations repurchasing their own stock. The dollar is supported by tradition, habit, and currency swaps.

The American House of Cards continues to stand only as a result of the tolerance of the world for vast corruption and disinformation and because greed is satisfied by the money made from a rigged system.

Russia and/or China could pull down this House of Cards whenever either country or both had leadership capable of it.

Copyright (c) 2013 PaulCraigRoberts.org. All rights reserved.

http://www.paulcraigroberts.org/2014/09/25/will-russia-china-hold-fire-war-alternative-paul-craig-roberts/

Categories: Uncategorized

There are things worse than slow growth

It’s not too soon to worry about the US economy

by Editor

Fabius Maximus (September 18 2014)

Summary: Here’s another status report on the US economy. Most economists expect faster growth. Perhaps so, but there are dark spots in the picture. Concerns about unsustainable auto sales, weakening exports, and (the big one) the mini-housing boom rolling over.

Slow Economic Growth

http://fabiusmaximus.files.wordpress.com/2014/07/slow-economic-growth.jpg?w=300&h=198

Expectations run high for the US economy, an acceleration from the two percent per year GDP growth we’ve had since the crash. Surveys record optimism among purchasing managers, builders, and consumers. Manufacturing remains strong, with hints of the long-awaited capital expenditures boom.

There are several engines driving the slow growth of US economy. Large among them are automobile sales, housing (both new and existing home sales), and exports. Export growth might fade as the US dollar rises (decreasing competitiveness of US goods) and the Japanese and European economies slow. Automobile sales are driven by mad long-maturity loans to sub-prime borrowers –  a boom almost certain to end badly {1}.

Now perhaps its the turn of housing. Top real estate analyst Mark Hanson has been warning since late last year that the housing markets were rolling over –  as described in {2} and at {3}. Now a second voice speaks up.

Joshua Pollard was Goldman’s lead US housing analyst from February 2009 to March 2013. He’s written a forecast for the US housing market in the form of a letter to the President. It can be downloaded from his website {4}. He has some disturbing conclusions. It’s deeper and more complex analysis than Hanson’s, but comes to similar conclusions.

Summary

House prices are twelve percent overvalued today. They have already started to decline. Today’s misvaluation matches the excess of 2006 and 2007, just before the Great Recession. Since World War Two home prices have been tightly correlated to income and mortgage rates (R2 = 96%). Investors/cash purchasers, which make up fifty percent of home sales, have driven real estate volatility to unrivaled levels in trackable history. As public policy makers debate seminal decisions on “forward guidance” and unconventional monetary stimulus we note that each one  percent increase in rates drops home valuations by another four percent; at a two percent Fed funds rate, where Fed offi­cials and investors expect to be by the end of 2016, the overvaluation equals twenty percent.

Respectfully, the United States cannot afford another housing driven recession. The facts and correlations –  the tenets of probabilities –  suggest it is more likely than not that home prices fall fifteen percent in the next three years.

It’s a complex analysis. A top-down view, unlike Hanson’s ground-level perspective. It’s worth reading in full. If Hanson and Pollard are correct, then America might start a downturn from a position of weakness unique since World War Two. Now for the bad news …

Crystal Ball

http://fabiusmaximus.files.wordpress.com/2013/08/20130827-crystal-ball.jpg?w=300&h=156

After five years of slow growth, most economist expect accelerated growth. As they do each year, only to see their hopes dashed. Perhaps there is are structural forces at work.

In January 2011 the Federal Reserve estimated the long-term growth rate of the US economy at 2.5 to 2.8 percent {5}. This week the Fed’s estimate had fallen to 2.0 to 2.3 percent –  barely above the two percent “stall speed” {6}. Also their forecasts for 2014 to 2016 have steadily dropped. Years of low investment by the private and public sector (see links below), a decaying education system, rising debt levels, and demographic headwinds (an aging society) –  all these things reduce America’s ability to grow.

For details see {7}.

Links:

{1} http://fabiusmaximus.com/2014/08/07/subprime-auto-loans-consumer-credit-70572/

{2} http://fabiusmaximus.com/2014/01/30/housing-bubble-62978/

{3} http://mhanson.com/

{4} http://www.joshuapollard.info/

{5} http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20110427.pdf

{6} http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20140917.pdf

{7} http://fabiusmaximus.com/2014/07/09/us-economy-growth-stall-speed-ecri-69794/

http://fabiusmaximus.com/2014/09/18/economy-growth-forecast-housing-71956/

Categories: Uncategorized