The horizon is not so far as we can see, but as far as we can imagine

Month: November 2014 Page 1 of 2

Ferguson and the brokenness of America’s “Justice” System

There isn’t much to say that others haven’t, but let’s go through it anyway:

  • There was never any chance that Darren Wilson would be charged;
  • the prosecutor acted as defense attorney, not as prosecutor;
  • A grand jury, for all intents and purposes does what the prosecutor tells it to;
  • Doing the announcement at 8pm at night was intended to incite violence;
  • Police in America are completely out of control, and police have a license to kill;
  • this is bad for anyone, but it is terrible for African Americans and Muslims.

At this point, in America, calling the police for anything short of a murder is more likely to make your situation worse than better if you aren’t solidly middle upper class or better, and white.  If you are black or Muslim, you might not even want to call them for murder.

Police can beat your, rape you or kill you, and the odds are very high they will get away with it.  In far too many cases they are nothing but the strongest gang.

The police are so militarized that they amount to a domestic army, stationed in every city.  The civil forfeiture laws, RICO statutes and the cost of an effective defense, plus the removal of most judicial discretion and the fact that the vast majority of cases are plea bargained, not tried, means that for most accused of a crime there is no justice.

The police have huge incentives to charge people with crimes, because they can seize the assets of those charged (well, strictly speaking, they can seize your money without ever charging you, and do.)  For profit prisons and prison guard unions support prosecutors and judges who will imprison more people, not less.   The incentives in the system are almost all towards incarcerating more people and seizing more assets, because that’s how police and prosecutors improve their personal situation.

Prisons are rural support projects where poor whites are paid to lock up poor blacks.

The entire system stinks from one end to another.  The simple solution would be to repeal all drug ordinances, make civil forfeiture illegal, get rid of the RICO statutes, most of the anti-terrorism statutes and mandate that plea bargains are illegal and all criminals must have a trial.  The fact that the current system cannot run if a trial is necessary is the point, too many things are crimes which should not be.

If you really want to make the system work, make all private lawyers for criminal charges illegal, and use only public defenders, chosen by lot. I guarantee that the pay and competence of public defenders would soar and their case load would drop as soon as rich people realized that they could be the one being defended by an overworked and underpaid lawyer.

A word on Abenomics, QE and doing Stimulus right

Quantitative Easing, to put it simply, no matter what form you do it in, is only marginally effective.

Most of the money goes to the rich, you may or may not get a technical win in GDP, and in many cases the money may flow out of the country.

If you want to improve the economy overall, enough that it shows up for everyone and you get an actual good economy (as opposed to an economy where the poor and middle class actually get poorer) you have to target where the money goes very carefully, and not just use it to buy various financial instruments.

The idea that buying more bonds, or mortgages or whatever, is an effective way to help the overall economy has been disproven over and over again.

Be clear, QE picks winners.  Buying mortgages or buying bonds is picking winners.

Any effective government intervention in the economy must pick winners.

In most cases this is not about infrastructure.  Japan poured ludicrous amounts of concrete over the last 4 decades and it did very little: infrastructure is great if you don’t have enough, but building more than you need is stupid.

In early 2009 I wrote about how to do stimulus right.  Here are the parts that are most applicable right now.

Provide a direction private industry and individuals can get behind

The stimulus bill and other economic policies need to show where the industry of the future is going to be, so that private actors know where to build up their own capacity, where to hire and what to buy capital equipment for.  Commit 200 billion a year to a massive telecom buildout for the next 4 years, and companies are going to line up to get involved in that business.  Make it clear you’re going to massively expand health infrastructure and they’ll line up for that business.  They’ll make long term investments, hire people, train people and do R&D. Programs that look like they will go away almost immediately won’t make businesses decide to invest in increase capacity—it might not be there next year.  Right now the only large scale project that looks really certain to occur for years under the Obama administration is a war—the Afghan war.

Restructure to allow unfettered growth in the future

The last economy cracked up for a reason.  Or rather, for multiple reasons.  You need to know what those are, and you need to get rid of them, so it doesn’t happen again.  If you don’t properly regulate the financial industry they will do another bubble (especially since you bailed them out of the downside, so why shouldn’t they?  They got the profits, and the public paid the losses.)  If you don’t do something to make sure that oil prices don’t spike again (both on the demand end and in terms of reigning in speculative excess) then the next time there’s a half decent economy they will strangle growth again.  There are plenty of other places where problems need to be fixed (too low corporate tax rates leading to cashing out instead of reinvestment, if you want a third).  If you don’t fix them, all you’re doing is putting electrical paddles to a patient whose heart is still a piece of junk and who is still going to have another heart attack when he eats his next cheeto ™.

In addition to these two things, one should spend when it’s cheap (aka. in recession or have the government buy up houses in distress, fix them and rent or sell them), and it should move money to people with a marginal prospensity to spend.  (AKA. cutting food stamps is idiocy, since people on food stamps spend all of them.)

This isn’t difficult and it is complicated only in the details so that it isn’t and wasn’t done indicates a combination of ideological blindness, greed and corruption.  It isn’t done because the people at the top don’t want to do it.

Why the Sharing Economy is Destroying Prosperity

Let us start with Uber drivers:

Uber has become like Walmart. Drivers now make less than the minimum wage when we do the math,” said Abdoul Diallo of the newly formed Uber Drivers Network, which opposes new lower fare rates set by the company.

The high-tech livery-service firm recently slashed passenger fares to compete with car services such as Lyft, Gett and regular yellow cabs, a move that drivers say takes money out of their pockets.

Some Uber drivers claimed fares — and their paychecks — had been chopped 25 percent in recent months.

Other drivers said they make less than a living wage, just $7 to $12 an hour after expenses and fees — far less than the $25.79 an hour Uber promises drivers can make by joining its fleet, protesters said.

Drivers began complaining that Uber was taking them for a ride back in July, when the company temporarily launched its less-than-taxi-rate Uber X service.

In late September, Uber ­extended those cuts permanently — outraging drivers.

Uber treats drivers like private contractors, saddling them with insurance, gas and vehicle expenses but the company has total control over fares.

In its essence the sharing economy is similar to offshoring and outsourcing in how it works.

Let us establish the basics: high income for individuals, absent government fiat, is based on a tight supply of whatever it is they are selling, and nothing else.

This can be a generally tight labor market, as in the late 90s or most of the years from 45 to 68, or it can be in a specific area.  If you have an occupation where most people can’t compete, you make more money.  This could be because you have skills they don’t have, it could be because of artificial scarcity imposed by regulation (most professions which require licensing), it could because of geography, and so on.

Hotels make decent money because any Joe or Jill can’t sell their rooms.  Taxi drivers (or, more accurately, those who own the licenses) used to make decent money because any schmo with a car couldn’t compete.  And so on.

In manufacturing terms, when those jobs pretty much had to be in a first world country, and the government enforced the ability of unions to strike by forbidding replacement workers, assembly line workers made good money.

So the sharing economy increases capacity.  It increases supply to areas which had constricted supply.

Supply increases, and the profits and/or wages of those in the old sector go down.  Spotify claims artists receive 6 cents to .84 cents per thousand plays.  That means 1 million plays will get you 6K to 8.4.  But there’s reason to doubt those numbers, Swift has refuted them, and earlier reports were lower as well, plus Indie labels get less.

All of these platforms: Spotify, AirBnB, etc… take huge margins.  Spotify takes 30%.  This is in line with what App Stores take, again, 30% being standard.

That number is one we’ve become numb to, but it’s essentially oligopoly or monopoly profits, a huge distribution rate. If you add that much to the cost of a product, it will sell far fewer copies and make far less money.  That percentage comes directly out of profits.

In most cases, one or two sites control most of the business.  Maybe three.  That makes them oligopolies or monopolies. You go through them, or you don’t make a living, and once they are established, they are essentially impossible to dislodge.

In the fifties or sixties this would have been recognized as clear abuse of monopoly or oligopoly power and they would have been busted up or regulated.

But they aren’t. Instead what they do is lower prices, vastly concentrate earnings (30% is a lot, and makes you billions if you control any reasonable platform, even if that billions is from equity), and they lower wages and earnings to everyone who doesn’t control the platform.

Now the sharing plaftorms would be ok (minus the oligopolistic abuse) in a genuinely booming economy where there genuinely weren’t enough workers, and where companies were competing for workers by increasing wages and treating them well (think how programmers were treated during the late 90s internet boom.)

Bring the extra resources online, let people earn some extra cash by driving occasionally, and move people over to the parts of the economy that are booming and need workers.

We don’t live in that world.  We haven’t, absent a few years, since somewhere between 1968 and 1980.

Instead what the sharing economy does is lower the value of specific types of labor and assets, allowing more people to compete, but reducing the actual earnings for those who are in that market.

Reduced prices might increase standards of living, and in any single case they do. The number of musicians who can’t earn a living under the new regime (not just Spotify) is much less than the number of people who can consume much more music.  People who want to be driven prefer to pay less to Uber.  AirBnB makes it cheaper to travel.  Etc… There are genuine gains.

But added to offshorng, outsourcing, oligopolistic storefronts like AppStores and Amazon, and with increase parts of the economy moving into the sharing economy, while in the meantime older jobs have been deskilled (all fast food is deskilling of cooks jobs, for example), and you reach a point where “there are hardly any good jobs”.  Prices are not dropping faster than good jobs.

The other effect of this is that because many of these trends are naturally oligopolistic or monopolistic (even fast food is, if you take a bit of time to think about all the small business restaurants they put out of business), they tend to concentrate wealth and income radically.  That leads to capture of the political process by the rich (yes, even more than already), and that leads to policies like, well, turning anti-trust law into a dead letter, or endless copyright extension, or vast numbers of anti-union policies.

As Stirling Newberry once pointed out to me the more humans are fungible; that is one human can replace another and do whatever that person is doing, the less they have value.  That doesn’t mean that fungibility is necessarily bad, it increases efficiency, can increase economic capacity, and so on, IF we choose to distribute the gains properly.  But absent trends moving in opposite directions it decreases the amount everyone except those who control the points of coordination of the economy make while vastly centralizing wealth, income and power.

The Sharing Economy really isn’t.  Sharing is the wrong word.  And for now, while some of us many win and get income we need for it, overall we’re losing.

The way we distribute resources; the way we distribute necessities and the good stuff of life is going to have to change.  Ultimately a market which  clusters into oligopolies;  deskills jobs; makes humans interchangeable; is not one which can produce widespread prosperity, let alone well being.  If we continue to distribute goods and power primarily by market success, even if we manage a fix, it will only last a few decades at most—and there is no guarantee, this time, that we will manage a fix.

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Character as Personal Destiny

I’ve commented before on character as destiny for societies.  Character, or personality if you prefer, determines how we act.  We all know people whose anger, or curiosity, or greed is predictable: people where you know exactly what they’ll do given a particular event.  Indeed, we truly know someone when we can make such predictions and get them right most of the time.

The idea of karma is related to this.  You’re born at a particular time, with a particular personality, to particular parents, in a particular place.  Your nurture and your nature (the personality that even babies have) is predetermined, therefore your life is predetermined, because how you will react to events is a matter of your character, which is your original personality plus the circumstances you grow up in.

The fully enlightened are said to be largely immune to karma.  This is because, often, as you meditate, it becomes clear that personality is a choice.   You don’t have to act in accordance with your personality if it’s not in your self interest.  This is true of everyone, but it’s one of those abilities most people don’t use.  As you meditate you become detached from your own character, it doesn’t seem important to you, and as a result it loses much of its power.  As it loses its power you become free to act as you please, and in that sense you break your karma.  (And by act, I also mean think.  The sort of terrible thoughts that plague many people lose much of their power.)

Some karma is harder to break.  Your body has karma (your genetic endowment, how you treated it while under the sway of your personality), and you can be stuck with that, or at least find it very difficult to change.  But in general, as personality weakens, you become free of what you may have considered most precious about yourself—your personality, which many of us consider to be “ourself”.

Nor will you necessarily bother to change your personality most of the time, because as you meditate such things seem less important: to be sure, the effective strength of your personality diminishes, but you also don’t care. It’s a personality, it’s not you, and why bother to act against it except in the case of important decisions? (And, again,  fewer things seem important.)

Meditation, then, can make you free and rob you of much of the juice required to make use of that freedom.  The less you care, the happier you are (I know many people won’t believe that, I’ll just say that in my experience it’s true, and many other people attest to the same).  I walk around these days, and I have a nice meal and I think “this is wonderful”, and I read a book and “this is great”, and even though my material situation is unsettled and precarious, I have everything I need – food, shelter, internet, books – and that’s enough to be happy (I haven’t been entirely robbed of ambition, mind, but then I’m not super-advanced in my practice.)

Still, I think it’s worth remembering that your personality isn’t anything super-precious, and that it can be your chains. Acting in ways that aren’t beneficial to you (or, often to anyone else) because of your personality serves no one.  Personality is often chains, and yet we treasure it.  If you want to be happier, be less attached to who you are.

(My previous article on the difficulties of meditation, and what it teaches.)

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The End of the American Dream and How Democratic Apologists are Creating It

I’m going to be even more blunt than usual. Democratic apologists (and Obamabots) are a huge part of why the US is becoming a worse and worse place to live for most of the population.

The only “progressive” group who really got any of what they wanted from Obama were gays.  Why did they get it?


They did everything they could to hurt Obama, politically and personally.

I will be even more frank, the contempt I have for Democratic apologists and Obamabots is far greater than what I feel for Republicans.  Republicans tend to be pretty straight: they intend to repeal the last millenium worth of social progress and institute a new Gilded Age.

Democrats, on the other hand, lie about how they care, care, care, but their ACTIONS show that they want to repeal the last millenium of non-identity based civil liberties and re-institute the Gilded Age.

Do not even dare to talk to me about the financial crisis.  The most important thing that happened to allow the financial crisis was the repeal of Glass-Steagall, which happened under Bill Clinton (D) with his whole-hearted approval.  Which is why Bill is worth 100 million or so now.  He made a lot of bankers and brokers very rich, and if you were hurt in the financial collapse and the shitty economy since then, well, he’s even more to blame than George W. Bush.

Furthermore things like the no-fly list and “1st Amendment Zones” started under Clinton.

Yes, the Big Dog may have had a pretty good economy, and may have been competent, but he is massively complicit in what happened after he left.

As for Obama, he has been worse on civil liberties than George W. Bush.  It is not even close.  He is significantly worse.

The thing is Obama promised to be great on civil liberties. He campaigned on that.

Democrats, as a group, are liars.  They make promises they do not keep.  People who cover for them are enabling this.

Now let me be even more clear.  The US and the developed world are in a Depression.  I know, I know, no one has told you that.  But when during the recovery and the boom the jobs don’t come back and the wages don’t increase, that’s a depression.  You just had the recovery and the boom and are moving into a recession.

You aren’t just going to lose twenty years.

You are going to lose your prosperity forever.  Sure, there will be good years (like about 3 years at the end of Clinton’s reign.

That is the smart money bet.  It is not that it couldn’t be stopped, it could be.  The policies required are known, the technology is available, and so on.  But they aren’t going to happen, because both parties want it to happen.  They compete to give money to the rich, that is their job, and apologists (for whichever party) enable it.

People keep using the Japanese lost decade as an analogy.

Japan did not lose a decade, it never recovered.  And it is still getting worse.  And Japan, remember, started with a huge trade surplus and a massive savings rate (though it did have a demographic time bomb.)

You redeem one of the two parties, by taking out bad actors, or you create a viable third party, or you lose your prosperity unless you get very lucky (and by very lucky I mean “get an FDR at the right time.”)

Obama could have been FDR. He was given the opportunity. He blew it.

And Dem apologists made excuses for him all the way along.  “The Republicans are worse.”

Yes, well, I’d rather be killed by an axe murderer than a guy with a chainsaw, but at the end of the day, I’m still dead.

And so will be your prosperity.

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The Secret Democratic Plan to Win!

Our plan is to have an even worse economy for longer than Bush.

To top it off, we will give MORE money to the rich than Bush did, and less to everyone else.

Surely, this will lead to re-election!

(No, but it will lead to Obama making even more $$$ than Clinton did after his Presidency, and faster)

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Falling Oil Prices Are Mostly Bad News

Yes, it’s nice to play less for gasoline and heating fuel, but while some of the decline in oil prices are a result of the new unconventional oil supplies which have come on line, much of it is that the world is going into recession—demand is down from every major economy.  That’s not good.

Yesterdays’ post showed what happened in the US job market over the last 6 years.  It never recovered for most people.  Remember, in terms of business cycle that was the recovery and the boom.  Those were the good times.

As for oil, the drops are to many conventional oil producers advantage if they can sweat them out. Much of the unconventional oil which came online is not viable below $80/barrel. The viability numbers you see for countries like Saudi Arabia are not their profit break even numbers, pumping Saudi oil costs less than $10 a barrel, rather they are what the Saudi government budget needs.  But the Saudis can handle a few years making less if it send their competitors into bankruptcy.

Remember that in the late 90s oil was under $20 a barrel.  I would want to see oil under $40 a barrel, with excess supply, to expect an economy as good as the late 90s one was.  Remember also that this is not the first time this “run a shitty economy until new sources of oil come on line” play has been tried—while the details were different, this is exactly what Carter, Reagan and the Fed of the late 70s and early 80s did. Temporize waiting for the new oil supply.

But while new oil did eventually come online, notice also that the economy never really got good ever again: you have about 4 good years in the late 90s and the rest is crap (again, for ordinary people.  The wealthy did very well).

Finally, those fools in places like Canada (my home and native land) who thought the good times would never end and that letting the mixed economy (aka. manufacturing) die, are about to reap the whirlwind.

All Commodity Booms End.  No exceptions.  Always.

Repeat that until it sinks in.

The old Canadian economy ran as follows: during times when commodity prices were high the Canadian dollar went up making our manufactured goods uncompetitive, but we used the money from selling commodities to subsidize manufacturing.  During times when commodity prices were low, the profits from manufacturing were used to subsidize the the resource producing areas of the country.

Harper, that feckless provincial incompetent and neo-liberal ideologue, has broken the Canadian mixed economy, which existed before him for over 100 years.  This is probably because he’s an economist, meaning he was indoctrinated to believe neo-liberal dogma.  Or perhaps he’s just a fool, hard to say.

The only Federal leader who understands the Canadian mixed economy is NDP leader Mulcair (Justin Trudeau, while has nice abs, is not very bright, unlike his father, who was a genius.)

It might not be too late to rebuild Canadian manufacturing during the oncoming recession.  My fellow Canadians, think carefully about who you vote for, especially those of you in Southern Ontario. Your housing values will not stay where they are if Canada’s entire economy is based on boom and bust commodity cycles and there are no jobs except in resource extraction, flipping burgers and finance.  Mulcair tried to warn you, years ago.

Learn.  Or reap the consequences.

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Two Charts Show Why the Obama Economy Sucks

The Employment-Population Ratio (measures the portion of the working age population which is employed, from the BLS):

Median Household Income:

All of the blather about how the unemployment rate has decreased, the stock market is up, and so on, conceals the fact that there are less jobs for ordinary people, and they pay less.  Yes, the rich are doing great, but that’s all.

Why are Democrats losing the Senate?  I won’t say it’s just this, it’s not.  But if the economy was actually good for most people, they probably would be holding it.

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