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"One should either write ruthlessly what one believes to be the truth, or else shut up."

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Entries in Economics (322)

Monday
Feb202017

Why Trump Will Lose: The Economy

As Trump himself said during the election, no matter who is elected, the next president will have to deal with an economic crisis. Trump used the adjective "massive." I think it will happen this year or early 2018. I predicted this in 2014. Of course I could be wrong and there are a number of things that might delay it. But unless the business cycle has suddenly been abolished, it will happen. The only question is when and how bad it will be. 

Trump's tax plan might delay it as massive tax cuts will be a strong, but temporary, stimulus. But the best outcome for Trump is for the slump to come sooner rather than later. Unfortunately, massive tax cuts and spending increases would delay the inevitable, and make it worse. Some are predicting that the recession will be delayed until 2019. 

My update on my 2014 prediction is that it will not be as bad as 2008, but there are plenty of things Trump could do to make it a lot worse. I know the perception is that I am pro-Trump, but in fact, it seems likely that Trump will screw this up badly. I do agree with his policy not to have a war with Russia, and stop mucking around in other countries, but beyond that I do not agree with him. 

Here is David Stockman, Reagan's director of OMB, Office of Management and Budget, on the coming crisis. I am not as pessimistic as he is, but I think he is right.

 

Monday
Nov282016

Doomed By Debt

I am a sucker for a good infographic. Here is one for the problem of sovereign debt.

 

This is only the debt of the national governments. No personal or corporate debt is included. Also the imputed and unstated debt of the various governmental pensions and senior medical retirement programs like Medicare. 

How much does the average person have in retirement savings

Just how much has the average American family saved up? According to the EPI, the mean retirement savings of all families is $95,776.

But that number doesn't tell the whole story. Since so many families have zero savings and since super-savers can pull up the average, the median savings, or those at the 50th percentile, may be a better gauge. The median for all families in the US is just $5,000, and the median for families with some savings is $60,000.

Note that this is the savings for each family. This means that once you include the national debt the net savings rate is zero because most families have more than one member. 

I am not sure that any president, even St. Trump, can really do much about the lack of savings and high debt level. No one is even talking about the unfunded liabilities.  

Monday
Mar282016

The True Cost of Living

While I think that these kind of calculations overstate inflation, it seems obvious that the cost of living is growing much higer than is admitted. Admitting it would help bankrupt Social Security. 

 

I have discussed the inflation rate before. 

 

Wednesday
Mar092016

What Rough Beast Slouches Towards Bethlehem to Be Born?

TURNING and turning in the widening gyre

The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

This is one of Yeats’ most well-known poems. The purpose of a poem is not to predict the future but to capture a moment. Bible Prophecy can work that way too. 

We are in a transition period. But a transition to what? That transition certainly was evident to Yeats in 1921 when this poem was published. The Second Coming, the title of this poem, is not referring to the return of Jesus. It is insisting that something else is coming. We hold our breath as it comes. I think we can all feel it—with dread. 

That is why we have so much fear. I have written against the survivalist mentality here on the blog, but I too share that dread. Something is coming that will shatter our shared culture, our shared lies. I too see the event that the "preppers" see. I just do not think one can prepare for the Apocalypse

That does not mean one should not have some food stored. Nor does it mean one should not reduce debt. These are the things we should do anyway. 

I am not worried about a zombie attack. Or its actual real equivalent. But I am concerned that we are headed toward a decades-long period of decline like the Great Depression in the 30's. Are you ready? Get ready. You can prepare for this scenario. 

Herb Stein once said that if something cannot continue it won't. Our current economic situation cannot continue, so it won't. We are reaching the end of our culture, and its dominance in the world. As Leviathan heads toward Bethlehem to be born the most we can hope for is that we are somewhere else when it happens. 

Here is what Spark Notes, I suppose the internet equivalent of Cliff's Notes, has to say about the poem:

... the next age will take its character not from the gyre of science, democracy, and speed, but from the contrary inner gyre—which, presumably, opposes mysticism, primal power, and slowness to the science and democracy of the outer gyre. The “rough beast” slouching toward Bethlehem is the symbol of this new age; the speaker’s vision of the rising sphinx is his vision of the character of the new world.

The reason so many people are afraid is that they see Leviathan coming and see destruction. They may be right. I suggest that instead you look for the opportunities that this time might bring—for in crisis comes opportunity. 

Wednesday
Feb242016

Gilligan’s Island as a Metaphor

Hearing my daughter play the theme from Gilligan's Island over and over again as she practices piano has led me to consider the hapless castaways. They seem to be a metaphor for the mess we are in. As you can see, others have had this thought too. I even saw an author interviewed on his book on the subject. But I doubt that each islander represents one of the seven deadly sins. Maybe the castaways were actually dead and in hell. No, No, that can't be right, no TV show would do that! Nor do I think Sherwood Schwartz's explanation that the show is a metaphor for international relations is valid, if he really said this. (It is dumb enough to be true.) 

But the analogies are so obvious they could not have been intended.

First there is the millionaire, and his wife. They never actually seem to do anything, and he seems to always have an alcoholic drink with a straw. Everyone seems to have brought along a lot of possessions for a three hour tour—the Howes especially. The wealthy actually do a lot more than is realized, but often stereotypes have some basis in reality. The Howes are always ready to provide advice as long as no work is involved. What is weird is that every other castaway gives then deference even though on the island there is no reason for it. 

The professor represents old-fashioned American ingenuity. He will get them off the island! But the Skipper and Gilligan seem to always mess everything up.

This is natural as the Skipper and Gilligan are the authority figures, the government, on the island. The government always messes everything up. 

My blogging predecessor suggested that Ginger represents the propaganda machine. Maybe. In any event I always picture her meeting up in the jungle with the professor. 

This leaves the unfortunate Mary Ann. Neither she nor the professor were important enough to be mentioned in the first season's theme song. She represents the common person who does all the work. While it seemed that Ginger helped, Mary Ann seemed to do most of the cooking. 

Poor Mary Ann!Romantically Mary Ann's choices were limited—the Skipper or Gilligan. Not the best of choices. That's right, Mary Ann's only options, just like the common man she represents, was to be screwed by the government. 

As for our heroes in real life, they got no residuals for their work. In real life they got screwed too.