Today's featured article at Roubini Global Economics:
"The global economy is sitting on a volcano. What happens next?" See it below.
Summary: Most people focus on the month-to-month changes in the jobs report, which consists mostly of noise (recently unpleasant noise). The year-to-date and 12-month changes are more revealing. We remain in a slow recovery, somewhat faster than in 2010. The results of the past two months (not shown here) suggest severe slowing! Enjoy this progress, as it was bought at great cost. A cost we cannot long continue to pay.
Contents
- Conclusions
- Household survey
- Establishment survey
- Unemployment
- Other important metrics
- For more information about US government finances
(1) Conclusions
Here we examine the May employment report from the Bureau of Labor Statistics. They conduct two surveys: one of households, one of businesses. They are not directly comparable, each giving different perspectives on the US economy. Today we look at the changes year-to-date and especially year-over-year changes (the latter avoids seasonal adjustments and distortions from the warm winter). The picture painted is consistent with the many other streams of information about the economy — effective rebuttal to both those seeing a good recovery as well as the cultists insisting all the government data is faked to re-elect Obama or benefit the Trilateral Commission.
The important detail to know about the recovery: during this period the government’s public debt increased aproximately $1.3 trillion — aprox 8.5% of GDP (see debt here and GDP here), one of the higher fiscal deficits in the world. Our shiny recovery results from massive borrowing and spending, without which we’d be in a deep recession, like Italy or even Spain.
In other words, organic growth has not yet resumed. The US economy has stabilized and slowly improves due to the massive “drugs” of monetary and fiscal stimulus. Both have severe side-effects, which at some unknown point in the future will become problematic or untenable. But the worst side effect was unexpected: the stimulus eliminated the pressure for reform. We have had the New Deal stimulus without the New Deal reforms (some of which failed, but some set-up the great post-war boom).
(2) The Household survey
Summary: Previous posts have discussed our perilous situation and how we got into this predicament. Let’s take a step back and ask why we are here. The says much about where we’re going.
From National Geographic Jan 2008
Contents
- We’re living on a volcano
- Let’s look at the volcano
- How big an eruption might we get?
- What can we do to prepare?
- For More Information
(1) We’re living on a volcano
Why do people choose to live on a dangerous explosive volcano? People are too comfortable to move, and it pays to live there. The soil is often rich. Some volcanoes have rich mineral deposits or tourism. And they probably will get lucky, as large eruptions occur decades or even generations apart.
Why do we choose to live on in a grossly unstable economic structure?
- I believe my government can prevent or mitigate a crash.
- I do not understand the risk, the odds of a crash and its potential magnitude.
- We believe this system is the morally best choice or the economically optimal choice.
- I believe that I can withstand a crash, or even profit from it (The rich often do, like Mr. Potter in It’s a Wonderful Life).
The Great Depression shattered most people’s faith in the West’s forms of free-market systems. But not the faith of those rich folks who benefited, like the Kennedy’s. Many of them found the New Deal’s efforts to mitigate the Depression’s effects more objectionable than the depression itself.
Now three score and ten years later we face a similar crisis. Fortunately the world’s leaders learned the danger of allowing a deflationary collapse to take hold. Facing an event roughly the same magnitude as 1929, they acted boldly and stabilized the global economy. That restored confidence in our systems — but that complacency prevented reforms (like those during the New Deal). Only the horror of the depression provided the impetus to overcome entrenched powerful interest groups.
The first aid was successful, but the underlying illnesses were not treated. So in the fourth year since the crash we see the pox reappearing. Cracks in the structure showing through the hastily applied paint.
The Republic has died. Let’s decide how to commemorate those responsible. Post your ideas!
Summary: Here we discuss the hidden history of our generation (hidden to us, obvious to future generations). At the end we announce a contest. What kind of monument best commemorates the two men responsible for killing the Constitution?
The Constitution has died.
It lived only in our hearts. At first government officials moved beyond the Law in secret (organizations such as the CIA were explicitly setup to do this). Then they leaked their deeds, testing for acceptance. Now they boast, rewarded by our applause (enthusiastic acceptance).
The Presidential campaign provides its wake, as candidates boast how they’ll take us into the post-Republic era. Obama has an advantage, as he can boast what he’s done to destroy the Constitution. About killing by drones, about the execution of bin Laden. As we see in yesterday’s advertisement pretending to be news in the New York Times: ”Secret ‘Kill List’ Proves a Test of Obama’s Principles and Will“.
We’ll see the movie later this year of a heavily-armed special operations team executing a old man.
The November election will provide a plebiscite ratifying the death of the Founders’ dream, as we passively choose between two candidates each devoted to building the post-Constitutional America.
Summary: Death to the enemies of America! The US government acts as prosecutor, judge, jury, and executioner. We’ve tried this before. It failed then. It will fail again. But this time we’re killing on a larger geographic footprint, outside the context of “war”, for longer. We risk blowback, when somebody who has lost a loved one decides to strike back. Somebody competent, with friends — or allies.
To the US government our enemies come in four kinds (source):
- Known insurgents
- Suspected insurgents
- people who would possible become insurgents if they lived to adulthood
- people who would be insurgents but for the fact that they are not insurgents
From The Best and the Brightest, David Halberstam (1972):
Occasionally {General} Harkins would mouth phrases about this being a political war, but he did not really believe them. the American military thought this was like any other war” you searched out the enemy, fixed him, killed him and went home. The only measure of the war the Americans were interested in was quantitative; and quantitatively, given the immense American fire power, helicopters, fighter-bombers and artillery, it went very well.
And this:
That the body count might be a misleading indicator did not penetrate the command; large stacks of dead Vietcong were taken as signs of success. that the French statistics had also been very good right up until 1954, when the gave up, made no impression. The French had lost the war because of a lack of will and a lack of fire power; Americans lacked neither will nor fire power.
And this:
At an early intergovernmental meeting on the importance of psychological warfare, one of {General} Harkins’ key staffmen, Brigadier General Gerald Kelleher, quickly dismissed that theory. His job, he said, was to kill Vietcong. But the French, responded a political officer named Donald Pike, had killed a lot of Vietcong and they had not won. “Didn’t kill enough Vietcong,” answered Kelleher.
From today’s Obama advertisement pretending to be news in the New York Times: ”Secret ‘Kill List’ Proves a Test of Obama’s Principles and Will“. Read it carefully. Imagine how Adams, Jackson, or Lincoln would react to this.
A look in the mirror at America
Summary: Again we attempt to recalibrate our vision of America, adjusting for its incredible rate of decline. People watching its power and money will find the probable future crash a surprise. Not so those watching the decay of its vision, heart, and mind.
The future of the American dream (by Maverick Zack)
The secondary goal of the FM website is to help readers better understand our world, especially current trends and likely futures. A look at the Past Predictions (right ones) and Smackdowns (wrong ones) pages shows three things about the FM website.
(1) We provide a stream of accurate predictions about the near future, on a wide range of subjects, such as correctly forecasting the outcome of our wars, peak oil (2005 was not the peak, but the cornucopians were also wrong), the debate about climate science (much bad analysis and failure to follow norms of scientific procedure).
(2) We gave early attention to subjects now receiving wide attention, such as the increasing success of women over men, the college bubble, and rising inequality in America.
(3) Unfortunately we’ve gotten the big issues about America mostly wrong, being far too optimistic. We’ve re-calibrated (eg, here and here), but inadequately. Today we’ll try again.
America here and now
Waging war requires the State to mobilize resources, the most important resource being the people. Since every action creates a reaction, the process of war shapes the people and the nation, its effects lasting far after the war ends. Now, almost 11 years after 9-11, we can see several effects of our long war. It’s exacerbated existing ailments in US society. As a result we’re rotting, becoming a danger to ourselves and the world. It’s happening faster than I imagined possible.
So far the process has continued with few reactions from our enemies and friends. Even in the Internet age people change their opinions only slowly. Our actions carve away the image of America built during the 20th century, leaving a much darker remnant. We see ourselves as the benign global hegemon, so the coming loss of both leadership and respect will hit us hard.
Rising bloodlust
A thought for and about Memorial Day
Summary: Memorial Day should not be a time for self-congratulation or celebration. What is it about?
Not all the deeds done by our troops have been glorious, nor have all their missions been just or even good. But that is our responsibility, as the citizens of the United States. Our men and women in uniform served this nation. Most contributed their time and energy. Many contributed much more. Some contributed all they had to give.
That’s what we should remember on this day.
Speech by President Lincoln given at Gettysburg, Pennsylvania on 19 November 1863
Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.
Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.
But, in a larger sense, we can not dedicate — we can not consecrate — we can not hallow — this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here.
It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced.
It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.
Two ways to celebrate Memorial Day
Summary: To recapture our greatness we must first remember what we did right to become great. Such as heavy investment in America by the government. Instead we spent on projects like Apollo (expensive, but no gain) and our mad unprofitable empire. It’s not too late to get back on the smart path.
{Apollo} had accomplished its original purpose, and the return {to the moon} was not seen as so valuable to be worth that kind of money by the political system. …. other endeavors were different. For example, the opening up of the New World. There clearly was once people got over here, a reason to come back.
— Glynn S. Lunney (NASA flight engineer for the Apollo program), quoted in Before This Decade Is Out, edited by Glen E. Seanson (2002)
The great tragedy of the effort was that the best of American technology and billions of American dollars were devoted to a project of minuscule benefit to anyone. One can speculate endlessly on what might have happened had all that effort and money been devoted to an earthly reject of more obvious benefit to the world, such as medical research or the development of alternative energy sources. … Americans {went to the moon} but they arrived at parties to celebrate the lunar landing in Toyotas, Datsuns, Volkswagens, and Renaults.
—Dark Side of the Moon – The Magnificent Madness of the American Lunar Quest by Gerald J. Degroot (2006)
Our reign as a superpower after WWII resulted from our peers’ devastation and slow rebuilding. The combination of technology developed from 1928 – 1945 and little competition gave America an incredible surge of income. Properly invested it could have boosted our economy into the 21st century. That’s the pattern of history. Wise accumulation and investment of economic surpluses provide the foundation for national greatness, just as much for the irrigation systems of ancient Mesopotamia as today.
Unfortunately we decided instead to emulate ancient Egypt, investing in projects of national greatness generating little value: NASA and DoD. Apollo was our largest single civilian investment program since 1960, an operational success which produced almost no return in terms of national income or productivity.
Fabius Maximus
Chet
don
GI Wilson
Joe Bonham
Tom Hayden
Marcus J. Ranum
