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

Category: Economics Page 1 of 87

Scratch A CEO, Find A Fascist

Not that they require fascism, but they’re OK with it:

David Zaslav, the CEO of CNN’s parent company, at the Allen & Co. media conference in Sun Valley, Idaho, on Tuesday:

Asked about the upcoming Presidential election, Zaslav said it mattered less to him which party wins, so long as the next president was friendly to business.

“We just need an opportunity for deregulation, so companies can consolidate and do what we need to be even better.”

One of the few things Biden has been good on is anti-trust, so this means Trump.

In a similar vein:

The pull quote:

“France’s corporate bosses are racing to build contacts with Marine Le Pen’s far right after recoiling from the radical tax-and-spend agenda of the rival leftwing alliance in the country’s snap parliamentary elections”.

The left, and real left, not the so-called “Center Left” will always be opposed by corporations, just as most of them opposed FDR. They want to get bigger and richer, whether that’s good for the country or not. High marginal tax rates, vigorous anti-trust and high corporate tax rates with laws forbidding stock options and other nonsense produced America and Western Europe’s best economy in history—the post-war states from 45 on.

Of course, during that time period the CEO/Worker pay ratio tended towards 30/1 or so.

But, as we all know, workers made enough so that a single wage-earner could support a family, and as for GDP growth rates, well:

These charts are pretty clear. Consolidation and deregulation do not lead to higher GDP growth, and that’s leaving aside redistribution.

This is important because the argument for deregulation and allowing consolidation was that it would make growth better and that there would be a “trickle down” which would leave everyone better off even if inequality soared.

Well, we did get trickled on, I suppose


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The Dollar Is Impregnable & The West Will Always Control International Banking (Honest)

What is geopolitical risk, you ask, and the Saudis answer:

Saudi Arabia warned it could sell off some European debt holdings in retaliation to a move by the G-7 to seize almost $300bn in frozen Russian assets, according to a report by Bloomberg.

The veiled threat was passed along from Saudi Arabia’s finance ministry earlier this year to some G-7 counterparts, as the group weighed seizing Russian assets designed to support Ukraine.

Saudi Arabia specifically signalled out the euro debt issued by France, according to Bloomberg.

Riyadh has been concerned about western efforts to seize the Kremlin’s assets for months. In April, Politico reported that Saudi Arabia, along with China and Indonesia, was privately lobbying the EU against confiscation.

Notice that Indonesia is also involved. China is less surprising, they know that freezing and even confiscation is in the cards for them when things heat up between the West and china.

China has been reducing its risk:

Edit: (Or perhaps they aren’t?)

No one wants to do business with nations that will simply take away their money. Freezing was bad, but normal. Seizure is not. Since no one seized or freezed America’s overseas assets when it invaded, say, Iraq, and no one ever seizes or freezes West European assets, it might be thought that this isn’t about “law” but about “power.” For that matter, why haven’t Israel’s overseas assets been seized?

The level of geopolitical risk from doing business in the dollar or using the Western banking system is just too high. Freezing, seizure and sanctions, plus the US applying its law extra-territorially simply because a transfer happened to go thru an American bank even though the sender and end party were both outside of America.

This abuse is long-standing, you can read accounts from the fifties, but it really picked up in the 90s. Indeed there’s an entire book, Treasury’s War, about the phenomenon.

And this is what all the economists and similar pundits who go on about how the dollar can’t be replaced don’t understand: that they are right that the costs of replacing the dollar are significant; that it’s hard, and that it’s not really worth it.

Except it is worth it, because if the cost of trade and money transfers goes up slightly under a non-dollar regime, and even a slight increase is massive when multiplied by the number and amount of transactions, it’s still worth it because of the massive reduction in geopolitical risk. And nattering on about how the Yuan can’t be used because the Chinese can’t accept the costs of using the Yuan is stupid: that’s not what the BRICS are trying to do: the idea is to create a central, multinational currency, and to simply use local currencies whenever possible, while avoiding the Western banking system entirely.

Everyone knows that the dollar and the Western banking system are guns, and that everyone who uses the dollar and the Western banking system are under those guns and can be hit at any moment if D.C. or Brussels desires it.

When this was hardly ever done, it was a risk worth taking. When China was the main industrial power who you could buy almost everything you wanted from, and the West was the only option for most technological goods, well, you had no choice.

But now nations see a way out from under the guns, and they’re going to take it, even if it costs them, because the potential cost of not doing so is catastrophic.


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Open AI Pulls Out Of China In Another Boneheaded Move

The effect of chip sanctions was to create a Chinese chip industry which now controls the low-end of the chip market, and which is coming on strong. The effect of Huawei sanctions was to make Huawei stronger, end Android support and gut Apple’s market share in China.

Now we have this brilliance from “Open AI”, presumably at US government behest:

Chinese attempts to lure domestic developers away from OpenAI – considered the market leader in generative AI – will now be a lot easier, after OpenAI notified its users in China that they would be blocked from using its tools and services from 9 July.

“We are taking additional steps to block API traffic from regions where we do not support access to OpenAI’s services,” an OpenAI spokesperson told Bloomberg last month.

OpenAI has not elaborated about the reason for its sudden decision. ChatGPT is already blocked in China by the government’s firewall, but until this week developers could use virtual private networks to access OpenAI’s tools in order to fine-tune their own generative AI applications and benchmark their own research. Now the block is coming from the US side.

Generative AI isn’t like lithography machines. It takes vast amounts of data and a bunch of coders and scientists, and China has plenty of both. In fact, it’s limited mostly by access to data: social media, websites, books, art work and so on.

There’s no particular reason to think China can’t catch up and exceed in generative AI.

It’s interesting, though, that China’s government was already blocking Chat-GPT. Clear protectionism meant to help the internal market. China’s decoupling as much as America is.

My guess is that in five to ten years the most advanced generative AI will be in China. Just as Tesla was once the world leader in electric-vehicles, then Chinese companies ate its lunch (you can get a decent EV for 14K$ in China and at each price point the quality is better than Tesla), Chinese AI companies will out-perform Open AI.

It’s China’s world now. We just live in it.

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The UK’s Housing And Immigration Crisis In Charts

Here’s the TLDR: the UK has a housing crisis because it is bringing in way more immigrants than usual and not building way more housing.

(Most of the charts from Simulcrax.)

For a long time Britain was building more housing than it had population increase. This was good, because as anyone who visited England in the 50s or 60s will tell you, it didn’t start with an excess.But starting around 2000AD it increased immigration and didn’t increase how much housing it was building, and after a while that caught up.

The chart only goes till 2019, though. Let’s see what happened afterwards.

 

Wow. That’s pretty ugly, and hey, it happened under the anti-immigrant Conservative party, and after Brexit, which was supposed to reduce immigration. Anyone wonder why Reform is challenging the Conservatives for second party status?

Now let’s be clear: immigration can be good, bad or mixed. If your economy is doing really well, you have low inequality and high wages and not enough workers and an economy which makes most of what you need domestically, then immigration is going to be good: the immigrants will get good jobs, increase demand and the economy will expand. But if you’ve gotten rid of your industry, have high inequality and an economy which is sucking wind then immigration is going to take jobs from natives and keep wages lower. And if you aren’t building enough housing and don’t do something about that, it’s going to raise housing prices, especially at the bottom and middle, which is going to hurt people.

The people it will hurt most, of course, are:

The chart pretty much speaks for itself. Let’s look at one more chart:
Ouch. I mean, it’s not like the situation is good in the US, is it?

Let’s be clear about what’s happening: it’s not that the UK can’t reduce immigration, it can, especially post-Brexit. Like Canada, however, it wants to increase GDP and keep wages low, so it’s bringing in as many people as it can, as deliberate government policy and doing so, without a booming economy, is hurting people who already live in Britain.

You don’t have to be racist or xenophobic to believe, accurately, that too much immigration is bad if there isn’t enough housing and jobs to absorb the immigrants. Problem is, given how people are, they will blame the immigrants and become racist and xenophobic, when the correct response is to hate the government and ruling class.

Britain, having deliberately de-industrialized, especially since Thatcher, can’t absorb this many people without causing extreme harm to people already living in Britain, especially if the government doesn’t move, massively, to social housing. People who want less immigration are correct, the only way to absorb this sort of influx without harm would be an entirely different set of government policies, even then, the immigration surge wouldn’t make sense until the policies take effect.

Unfortunately the only chance of pursuing anything like those policies was to elect Corbyn, and that chance has passed.

The sun always sets, and now it sets on Britain.

Addendum: Stumbled on this after writing the article.

He continues: “According to the Government’s own methodology, we needed to expand the housing stock by around 3.4 million homes over the last decade: 2.2 million to meet existing housing pressures, and 1.2 million to cope with net migration. We increased the number of homes by only 2.1 million.”

So, without immigration, they’d only be down 100,000 over the last twent years, rather than 1.3 million.

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China’s Rise Is Normal

China used trade protection and cheap wages & grabbed industry from the leading industrial power exactly the same as the US did with Britain.

 

The tech/science lead follows the manufacturing floor, with some delay, this was, again, the same with Britain & the USA.

The dynamics of industrialization are well understood at this point. The first books to read are “Bad Samaritans” and “Wealth and Democracy”.

Unlike Japan or South Korea, China has a larger population than America (same as America vs. Britain) and is has a large land mass and plenty of resources. In fact, it has slightly more land area than America.

Initial industrialization in England is an interesting story and still hotly debated. Later industrialization waves are mostly all the same. (The USSR is an exception, as are city states.)

Big leaps, as opposed to adaptations of existing models almost always come from states in hot competition, and among them the peripheral states usually win (Britain, for example, is peripheral to Europe.) The biggest tech surges in Chinese history came during warring states periods.

I’m very impressed by China’s rise and the West’s sheer incompetence in enabling it, but it’s not a huge leap the way the industrial revolution was. It’s just an extension of a previously existing model.

Japan’s rise was more impressive than China’s, as the first non-European nation to pull it off. But as an island nation with limited population, they were sharply limited. They made 2 runs at the US, one a war, one industrial, and neither let them become the foremost power.

The West was very good at keeping everyone but client states from industrializing. Even Japan needed British aid (the first time), then America’s (the second time.) But the West got stupid under neoliberal “end of history” ideology & let China run the playbook, thinking it wouldn’t challenge the West. Oops.

Americans probably should have learned from the Western experience with Japan. The British enabled Japan’s rise only to have Japan attack British possessions. Without American aid, that loss would have been permanent. But China is a continental power w/a massive population. The stupid was epic.

A radical change in economic model hasn’t happened yet, and seems unlikely to before ecological and economic collapse puts an end to the viability of the current model. Looking at Chinese cities with the 7 lane highways is instructive. It’s just a better version of the same old

A complete change of the permission system will be necessary for radical economic change. No one in power, whether in the West or China, wants that or can even imagine it.

Who knows, radical economic change might happen in China when collapse really starts biting. After all, they have the manufacturing base. But usually it happens at a periphery or in a tight area with multiple competing states.

This stuff is fairly well understood. However it’s not economists who put the pieces together, it’s sociologist and historians and even some anthropologists. Economists have done more damage to the West than astrologers did to Chinese dynasties. MBA factories get an honorary mention. (They mostly weaponized economic theories, as when they noticed economic theory saying that high profits come from not competing.)

One of the most instructive trends right now is watching so many people screaming about population collapse, when what the world actually needs is a lower population. (We could have avoided that necessity, but the window is closed. Sometimes you have to act at the right time.)

All people who yell about lower birth rates can imagine is economic growth through population expansion. Anyone who thinks that way can’t create a new economic model, they’re stuck in the old one. (Elon Musk is a good example.)

People who can’t even understand population overshoot are incapable of the thinking required to deal with the world’s actual problems.

We’ll talk about permission systems at a later date. As noted, they’re key.

If You Believe Either Biden Or Trump Will Halt Decline You’re A Fool

There are those, even some smart people whom I otherwise respect, who think that Trump is a way to halt and reverse American decline.

This is delusional.

 

As for Biden, his claims to success are based on statistics that only a toddler or an economist would believe reflect reality, leaving aside the fact that he’s overseeing the loss of the US dollar as the primary trade currency, which will hurt the US worse than an Israeli shoving a red hot metal rod up a Palestinian civilian’s ass.

I’m on team tariff. I think they’re often a good thing. But tariffs alone cannot fix the US economy. America has too many economic pathologies. Without crushing the rich, dropping housing prices, making Private Equity illegal, forbidding share buybacks, ending stock options for executives, massive anti-trust enforcement and huge number of other policies, the US cannot take advantage of being hidden behind tariffs, especially when China is now producing more scientific and engineering advances than America.

People want hope. They need it. And they will find it, or what passes for it. We saw that with Obama, the ultimate neoliberal wannabe, who immunized bankers from their crimes and helped them steal millions of houses with fraudulent documents, then expanded fracking and bragged about, not just giving up the last chance to slow or stop climate change, but actually lighting gas on fire to speed it up.

Then Obama bragged about how much he had increased oil and gas production. Bragged.

No one is coming to save you if you are American, or, indeed Western. LePen will me a garbage fire. Starmer is one of the most mendacious neoliberal politicians of the past 50 years, an impressive feat.

If you want to do politics, you have to stop pretending that you can fix the major parties, and go third party. Yes, it’s a long shot, but it’s your only shot.

More realistically, national politics isn’t going to save your ass. You’re going to have to do it yourself, ideally with the help of other citizens. Perhaps thru a church, perhaps through a neighbourhood association, perhaps through a maker group: whatever, find a way to get like minded non-idiots together and support each other and start making the necessary changes so that you, your family and your friends have a better chance of getting thru the bad times.

It’s up to you. Climate change will not be stopped. My bet is that it is now into self-reinforcing growth. If it isn’t yet, it will be. The West’s hegemony is collapsing. As I have written repeatedly, Europe is going back to what it was for most of its history: a peripheral shithole on the edge of the Asian continent. The US is losing its empire and when it no longer had dollar privilege or a military that other countries are in terror of, Americans will find out the cost of sending their industrial base to China because if you can’t make it, other countries are going to demand a pound of flesh to send it to you.

Hell is coming and both Biden and Trump lead there, just by slightly different routes.

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Remembering the Good Job Market Of the 70s

If you’re under 68 or so, and weren’t involved in regional boom or something like the internet bubble, you probably have never experienced a good job market. At age 56, I remember the 70s, and I even remember the job market after a sense: I was an only child and around my parents adult friends a lot. I had no uncles or Aunts by blood where I lived, but half a dozen Uncles and Aunts by friendship. And I do remember that just getting a job wasn’t a problem, at least not till the late 70s and the early 80s recession.

But better the words be from someone who was actually there. I think this is important, so I’ve elevated a comment from Marku52:

My wife points this out to me often “Back then (mid 70’s) I had tons of jobs. I’d lose one one day and have another one in a couple of days. It wasn’t a problem. And what a breadth of experience. She was a waitress (terrible at it, got fired), a photographers assistant, a computer data input person for an auto parts chain that was digitizing (She told the other workers “you know, they are only doing this so they can get rid of you”), and finally a paginator at a news paper using a brand new digital pagination system. All kinds of opportunities out there.

And for me, I got hired at a cabinet shop with nothing but some very basic woodworking skills, eventually became shop foreman, left to do electronic tech work at a sound company, boss even paid for another tech to come in once a week and train me. I went back to school and got my EE degree. (for $85 per quarter!)

Sure was a different time, and a way way better one.

This is what was lost because of neoliberalism and the decision to handle the oil shocks by crushing employment to crush wages. It’s a world hardly anyone even remembers any more.

But it did happen, and a world like it, but good for the environment and fair to women and minorities, is possible.

 

If Bosses Want At-Will Firing This Is What Is Required (The Good Society)

One of the great complaints of bosses and corporations is that they can’t fire people whenever they want to. Employee protections were one of the great victories of the 20th century and the union movement, though far more in Europe than in America, except in the Federal civil services.

But bosses do have a point: being able to get rid of employees without fuss isn’t unreasonable: they’re hired to do a job, and if you don’t like how they’re doing it, firing them makes sense.

At first glance the problem is that often such power is abused, in too many ways to recount.

But the real problem is that without a job, people suffer: they have less, they may wind up homeless, in the US they’re essentially cut off from medical care and so on.

In a society where you would have a decent life whether employed or not, it wouldn’t matter if at employment was “at-will.”

We still live in a surplus society. If we were to get rid of planned obsolesence, massively reduce pollution, and work hard at public services like frequent and reliable public transit, free post-secondary education and plenty of third place gathering spots, we could have even more of a surplus: or rather, use much less and stop destroying the environment, so that we would stay a surplus society. Making people work when what they do isn’t actually necessary, is a “bullshit job” or actually does great harm, like almost all of the financial industry, is stupid, and doesn’t increase human welfare.

So the compromise is guaranteeing everyone in society a good life: housing, transit, health care and recreation. Again, we can do this, we have the surplus, and if we got rid of 40% of work, well, we’d have a society which would actually produce more welfare, because that work is useless of harmful.

And in a guaranteed good life society, very few people are going to want to spend their lives figuring out how to serve ads better, or other nonsense. They will want meaningful work: work which is enjoyable or which makes the world a better place. They will tend to self-select for jobs which really do benefit others, especially if, at the same time, we cap wealth at something like 10x median, and income at 3x what’s guaranteed. (Which also means those who want wealth will have to improve the baseline guaranteed wealth.)

At that point, if bosses want to fire people at will, who cares? It doesn’t matter. In fact, it’s more likely that bosses who offer work that isn’t meaningful or enjoyable, or both, won’t be able to get workers.

And that, my friends, is what a good surplus society looks like.

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