Why the economy sucks

[The Man]

A new study by Nobel laureate Michael Spence has concluded what most of us already knew: that the current model of capitalism is failing the middle and lower classes.

[The Man]

I revive this thread because the U.S. misery index has risen to its highest level in 28 years. This means that unemployment and inflation combined are worse than they have been at any time since 1983 - or, to put it another way, in any time in my life.

[AynMisesLibertarian]

"Republican Bush destroyed the economy"...it is all Bush's fault!!
"Socialist Obama destroyed the economy"...it is all....big business' fault!!

[erimir]

Now, now, we thought it was Big Business's fault back when Bush was president too.

[SR71]

You are The Man! Can not find the superlatives to describe the OP. A tour de force.

Do you feel the globalists are intentionally driving a Great Leveling, if you will, or that the situation is more the result of following short sighted policies and strategies in pursuit of immediate profits? Are we just feeling the cumulative impact of numerous iterations of these short sighted manipulations, the result of which are the current structural disadvantages grinding away at the fortunes of common workers in the developed countries?

[Escapegoat]

Originally Posted by SR71

You are The Man! Can not find the superlatives to describe the OP. A tour de force.

Do you feel the globalists are intentionally driving a Great Leveling, if you will, or that the situation is more the result of following short sighted policies and strategies in pursuit of immediate profits? Are we just feeling the cumulative impact of numerous iterations of these short sighted manipulations, the result of which are the current structural disadvantages grinding away at the fortunes of common workers in the developed countries?

One from column "a"and two from column "b?"

[Watser?]

If Obama is a socialist then AML is a communist.

[SR71]

Originally Posted by Escapegoat

One from column "a"and two from column "b?"

Going on sentiment alone, you probably have it about right.

[The Man]

Two years later...

It’s still a bear market | Michael Roberts Blog

The latest data released just before Easter show that US corporate profits reached a record high in 2012. Since the trough of 2008 they are up over 40% and are now 7% above the previous peak in nominal terms set in 2006. Indeed, profits per employee has rocketed to near $16,000, doubling the ratio since 2000.

In contrast, wages are being squeezed and along with the below-par recovery in employment, the wage bill for capital is shrinking as a share of total value created. In other words, the rate of surplus value or exploitation, as Marx called it, has risen sharply.

[chunksmediocrites]

2,226 days later:

For most U.S. workers, real wages have barely budged in decades

In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

Jobs surge in April, unemployment rate falls to the lowest since 1969

The U.S. jobs machine kept humming along in April, adding a robust 263,000 new hires while the unemployment rate fell to 3.6%, the lowest in a generation, the Labor Department reported Friday.

Wow that's low.

Unemployment was last this low in December 1969 when it hit 3.5%. At a time when many economists see a tight labor market, big job growth continues as the economic expansion is just a few months away from being the longest in history.

The 'supply-and-demand model of labor markets is fundamentally broken,' and that's why you're not getting a pay raise anytime soon

Employers have gained enough power in the marketplace to permanently hold down wages, even when unemployment is as low as 3.9% in the US and 4.2% in the UK.

The old model was simple. It stated that the price of labor was set by supply and demand. If the supply of workers was restricted, wages would inevitably rise as workers switch jobs for better-paid positions or negotiate pay raises for staying.

Right now we are living through the most supply-restricted wage market since the 1970s. There just aren't extra workers available. In the US, there are 6.7 million job openings but only 6.3 million people looking for work, according to the most recent government numbers.

Opinion piece published June 18, 2018.

Pay rates no longer move upward as unemployment moves downward because companies like Uber, Just Eat, and Deliveroo can switch their demand for labor on and off on a minute-by-minute basis. Self-employed folks making a living on Etsy, Amazon, Airbnb, or eBay know their clients instantly go elsewhere if they raise their prices by even a few pennies.

Unemployment is low because a massive number of new jobs today are part-time gig-economy jobs. Part-time "underemployment" has, statistically replaced the mass unemployment we remember from the 1980s. As Johnson says: "A majority of people who are classified as poor now live in a household where someone is in work. This is a complete turnaround from 20 years ago when two-thirds of the poor lived in workless households."

In other words, in the old days when you lost your job you claimed unemployment benefits and lived "on the dole." Today, you deliver pizzas or stuff packages in an Amazon warehouse for 20 hours a week.

More:

Underemployment seems to have settled at a permanently higher level than it was a decade ago.

This has obvious political consequences.

Working is no longer a guaranteed way of getting ahead. Instead, it may keep you poor. You cannot get rich working for Uber. You cannot get rich working for Deliveroo.

The obvious function of the so-called gig economy is to create inequality. "The unemployed" now barely exist. In their place are millions of people stuck in jobs that offer too few hours to get by or jobs that don't come with a career ladder offering pay advancement.

Stats from August of 2018:
57 Million U.S. Workers Are Part Of The Gig Economy That's 36% of workers in the gig economy.

[chunksmediocrites]

I know that was a lot of links and not much commentary, so here's the commentary:
The orchestrated destruction of unions, the massively pro-business political parties, right-to-work states, the heavily captured regulatory systems, the lemonade socialism (government subsidies to the wealthy and powerful), a decline in the workforce participation rate, and a massive spike in suicides is partly why the economy sucks. The rapid transformation of work through technological obsolescence or automation is a piece of this as well; and importantly NAFTA and Free Trade has made capital free to move wherever the exploitation is the ripest, and left labor as capital's easily exploitable and pit-against-each-other wage-slave pools.

Americans are working harder these days. Their paychecks don’t show it.

Engineers, bartenders, supermarket cashiers, and other private sector employees are working harder than they have in the past few years. While productivity fluctuates each quarter, no matter how you measure it, it has been steadily rising overall since 2016.

...and worker productivity on a trend line has continually increased since 1950; in the 1970's the wages no longer rise on the same trend but flatten, while workers continue to work more efficiently, making more profit in less time for their employers.

Business employees and factory workers were more productive, worked longer hours, and produced more goods and services than they did last year. But their real hourly wages, which are adjusted for inflation, barely inched up. And real hourly pay for factory workers actually fell during that time.

Last year, a record number of US workers went on strike, according to data released in February by the US Bureau of Labor Statistics. A total of 485,000 employees were involved in major work stoppages in 2018 — the highest number since 1986...

Business industry itself is referring to this period as a golden age and openly worrying that the level of inequality that they have achieved through the logical efforts of capitalism is leading to destabilizing society; even these greedy see the

[chunksmediocrites]

This is from Michael Roberts, a Marxist economist's blog:
Inequality and risk – both rising

According to the Fed’s consumer survey, one third of middle income adults say they would borrow money, sell something or not be able to pay an unexpected $400 expense. One fourth said they skipped some kind of medical care in 2018 because of its cost. Nearly three in 10 middle-income adults carry a balance on their credit card most or all of the time. Meanwhile the share of income spent on rent by middle class renters rose to 25% in 2018 from 18% in 2007, a rise of 40%.

That's people;

The gini coefficient (the basic measure of inequality) for incomes is now at its highest ever in the US, at a record breaking 0.48 up from 0.38 in the late 1960s – a rise of 30%

That's inequality measured;

The latest report of the US Federal Reserve on the financial stability in the US makes sober reading.

According to the report, “Borrowing by businesses is historically high relative to gross domestic product (GDP), with the most rapid increases in debt concentrated among the riskiest firms amid signs of deteriorating credit standards.” Interest rates for loans are near historic lows, so the borrowing binge among companies continues. According the Fed, “Debt owed by the business sector, however, has expanded more rapidly than output for the past several years, pushing the business-sector credit-to-GDP ratio to historically high levels.”

Moreover, “The sizable growth in business debt over the past seven years has been characterized by large increases in risky forms of debt extended to firms with poorer credit profiles or that already had elevated levels of debt.”

And this borrowed money is not used to invest in productive assets but to speculate in the stock market. Indeed, the main buyers of US stocks are companies themselves, thus driving up the price of their own shares (buybacks).

As long as interest rates stay low and there is no major collapse in corporate earnings, this scenario of corporate borrowing and stock market buybacks can continue. But if interest rates should turn up and/or profits fall, then this corporate house of cards could tumble badly. As the Fed puts it: “Even without a sharp decrease in credit availability, any weakening of economic activity could boost default rates and lead to credit-related contractions to employment and investment among these businesses. Moreover, existing research suggests that elevated vulnerabilities, such as excessive borrowing in the business sector, increase the downside risk to broader economic activity.”

...and that's the business vulnerability, setting up for the next crash.

The author points out that the primary source of added wealth into the economic system is the, "rising price of financial assets"- this is similar to the financial instruments made infamous in 2008- collateralized debt obligations, layers of obfuscations to repackage questionable assets into gold-plated guarantees to sell to customers.

[SR71]

Along those lines, the US oil boom has been mainly the result of fracking, fracking has relied on heavy borrowing, and the borrowing has produced a lot of oil and a lot of debt but not much in the way of profits. Even at these low interest rates, overall, it's been a loser. Investors are catching on, the profit is always just around the next corner, yeah right. What happens next?

Buffett is betting on the Permian. He might beat the odds if oil prices rise and Anadarko has some of the last remaining sweet spots. Another wind at his back is that the rumors about Gawar, the super giant Saudi oil field, not having the reserves the Saudis say it does, are proving out to be true. I believe this ties in to the Saudi/US push to heighten sanctions on Iran. They want to keep Iranian oil off the market.

More on how to work like mad at going broke.

[Kamilah Hauptmann]

And Furthermore:

Fossil Fuel Subsidies Cost U.S. More than Defense Budget: IMF Report – Rolling Stone

[The Man]

Ohai, old thread I haven't posted in for far too long. Reposting comment from LGM on international economy and international relations. tl;dr: a recession is imminent in large part because our leaders are Dunning-Kruger poster children.

I’m growing increasingly convinced that the world economy is a series of dominos that simply haven’t begun to fall yet. The date I’m particularly focused on is October 31st, the date currently established as a deadline for Brexit. The British Conservative Party may actually make our Republicans look like shrewd planners, although Boris Johnson is at least much smarter than the occupant of the White House; he just plays dumb. (Even his seemingly disheveled hair is an appearance he actually cultivates.)

However, Johnson has also made a habit of winging it and trying to rely on charm whenever he’s in over his head, which isn’t going to work here. At some point, the European Union is going to get fed up with the Tories’ shenanigans and give them an ultimatum, and if that results in a hard Brexit, the whole world economy will crash.

I have not been able to follow the British news closely, just because our own ongoing slow-motion train wreck is stressful enough, but it seems to me that Labour has also been a rather ineffective opposition, and their political system arguably gives Corbyn incentive to let the Tories fuck everything up and own the catastrophe for a generation. And thanks to their first-past-the-post voting system, there isn’t really an effective alternate choice.

So that’s Britain. I work in a finance-adjacent field where I get to hear a lot of finance people talk. I’m legally prohibited from discussing specifics, but most of them are staggeringly unaware of how important the ongoing British catastrophe is. I only occasionally hear them mention it as a risk factor.

To be fair, many of them do recognise the danger posed by a continued trade war with China, as well as other warning signs such as the increasing frequency of yield curve inversions, but many of them are also quite blasé about both of these. It’s rather stunning how many of them still believe that a resolution to the trade war is likely. Have they not seen how every other negotiation involving this administration* has gone?

If any of you have aggressive investments and are liable to need them in the next few years, I’d advise you to get the hell out of the market during the next reasonably good day and put your money into something more conservative.¹ I should throw in the caveat that, of course, I have no formal financial training, but being around it as much as I have teaches you… a few things, to put it mildly. (I’ve seen² things you people wouldn’t believe… lost in time like tears in rain.)

So with that in mind, I don’t know what havoc the inevitable Brexit catastrophe will wreak on our economy. It won’t be as great as the havoc it’ll wreak on Britain itself, obviously – or on Ireland, for that matter – but it won’t be trivial.

With this administration*, I have no idea what the follow-up will be, but given how the decompensating occupant of the White House has responded to Denmark refusing to sell Greenland to him, it’ll probably be something like “I like countries whose economies don’t cause the world economy to crash. Sad!” and pretending he never supported Brexit in the first place, because he is a pathological bullshitter. And that’s if we’re reasonably lucky. If we’re really unlucky, he might nuke Manchester or something.

I don’t think the international order is going to completely unravel, though Putin is doing his best to make sure as much of it unravels as possible. It’ll just reshape around the absences of the United States and the likely no longer United Kingdom. It’s our loss. We’re throwing our influence away. China will, ironically, be the greatest victor.

Anyway, that wasn’t even why I started this post. It was this: Could American evangelicals spot the Antichrist? Here’s the Biblical predictions.

show spoiler

For most of them, the answer is no. There’s a shocker.

Wait until you get the fortress bit! (It’s what reminded me of the link.)

…we’re screwed.

¹Conservative in the investing sense, not the political sense. I don’t have any empirical basis for this, but I have a deep suspicion that there is an inverse correlation between conservative investing and what passes for political “conservatism” in the United States; that is, the more right-wing an American is, the less likely they are to be conservative in their investing. They certainly haven’t been making a point of conserving things like our environment.

²OK, fine, heard.

(In response to this post by Daniel Nexon, hence the bit about fortresses.)

[JoeP]

Oh yes. I have been noticing a number of articles indirectly implying we are on the brink of a recession if not outright saying it.

And I'm not the only one: The onset of a downturn is as much a matter of mood as of money - Free exchange

IN RECENT WEEKS the human and silicon brains at Google have registered an alarming rise in searches related to “recession”.

Today’s confusion owes something to the world’s odd recent economic history. The last global slump occurred amid an epic financial crisis. The one before that began nearly two decades ago, accompanied, again, by a stockmarket crash. ... Most people working today cannot remember a recession not linked to financial chaos. But downturns can occur without market meltdowns.

[Kamilah Hauptmann]

So I got thinking about Huawei and it turned into a bit of a ramble so here's some word spray. Cope.

So there was this little incompetently run Canadian company called Nortel. It had some nifty tech; this is typical of Canadian companies. Every so often we'd hear in the news something about another round of layoffs, and eventually it got to the point I'd think to myself they must be in the negatives for employment by now, but nope, three months later, another few thousand let go.

Quietly, this Chinese company acquires it, strips it of IP, discards the shell, starts selling spyware 5G super cheap. Because subsidies. Also, spyware.

USA annoyed by this development. Outwardly, because spyware. Quietly, because subsidies? USA has a long history of shouting about subsidies. UNFAIR! SAD! Canada has pine beetle problem threatening the entirety of the boreal forests in North America, engages in a massive cut? ERMAGERD, DUMPING! TARIFFS! PUNISH! FILTHY SYRUP SUCKING CANUCKISTANIS! Steel tariffs, trade disputes, ad infinitum, amen.

Clumsy seguay: How much of this foreign business incompetence is the divide between a superpower with dubious labour protections versus smaller powers with labour protections for businesses to deal with? And if this is a major factor, which is more fair, a race to the bottom in labour and human rights, or subsidies?

Final thought: Middle powers might do well to work closely with Sweden for their telecom needs and work toward a next generation SAAB fighter jet.

[JoeP]

Originally Posted by Kamilah Hauptmann

so here's some word spray. Cope.

In terms of word count you still have some way to go in the rankings.

[Kamilah Hauptmann]

Originally Posted by JoeP

In terms of word count you still have some way to go in the rankings.

This is the height of irony from Mister Pith.

[JoeP]

Originally Posted by Kamilah Hauptmann

This is the height of irony from Mister Pith.

I wasn't including myself in those rankings.

[Kamilah Hauptmann]

This is beyond satire pic.twitter.com/xdDHr4xCrn

— Shin Coryuken ➡️⬇️↘️��️��️ (@CorruptedTacos) March 6, 2020

[BrotherMan]

I think that may be better than company store credit.

[Kamilah Hauptmann]

"MAMA ECONOMY" (THE ECONOMY EXPLAINED) ORIGINAL...

[JoeP]

1. This meeting would have been better as an email (lyrics are in the youtube description for those with limited realtime patience, like the me of 4m10s ago)
2. Shit, he has a good voice
3. Shit, is that Lindsey Stirling? Yes it is!

[Kamilah Hauptmann]

Nothing illustrates the structural and systematic insanity of late capitalism like the idea that a giant pile of perfectly good food is some kind of complex economic and moral quandary. Fucking give it to people! https://t.co/mG0gezviFi

— ft (@ft_variations) April 3, 2020