Archive for the ‘Economy’ Category
That cheery quote is from a 2012 Harvard study cited in Washington’s Blog. The anonymous, but generally well-researched and highly credible, Wash Blog continues with the following:
- Inequality in America today is twice as bad as in ancient Rome, worse than it was in in Tsarist Russia, Gilded Age America, modern Egypt, Tunisia or Yemen, many banana republics in Latin America, and worse than experienced by slaves in 1774 colonial America
- It’s the highest level of inequality ever recorded in the U.S.
These are ominous allegations to be sure and suggest that we may be closer to a tipping point than normally thought. While I am in no position to argue the merits of the historical comparisons, Wash Blog also notes that Americans are unaware of just how far inequality has progressed in the US. That is an assertion I can attest to from personal observation.
Many have commented previously that the Tea Party and Occupy movements are reactions to the degrading economic situation for the middle classes in the US. The causes of this decline are hotly debated, with the prime culprits viewed as either the competition from foreign labor and/or tax policy in the US. A lack of infrastructure and education spending, which proportionately provides a higher benefit to those with less income, is also cited.
Winston Churchill famously quipped that you could “always count on the Americans to do the right thing, after they have exhausted all the other possibilities.” Let’s hope that Winnie was correct, as the historical record is filled with great cultures that have foundered on their internal inequality.
Lest anyone have any illusions about the nature of our proposed intervention in Syria – “moral outrage” or “defending international law” – this is about oil. As the FT points out (whence the clever part of the title of this post in quotes), the world’s major energy producers are facing off over Syria, with Russia and Iran on the one hand, Saudi Arabia and the US on the other. Influence in one of the world’s most unnaturally important regions is at stake and the consequences are very real to the world’s major economies.
Thanks to technological advances in “fracking,” the share of US oil consumption represented by producers in the Middle East has fallen from a high of 60% less than ten years ago to 40% today, and is projected to decline even further in the next decade, perhaps even to inconsequential numbers. The gas in your automobile is now almost as likely to come from North Dakota as North Africa. That said, we still import a critical share of our oil from the region today and Europe, Japan and our other major trading partners are likely to be dependent on the region’s output indefinitely.
The price of oil on the international market has risen some 20% in the face of the degrading situation in Syria, from below $90 a barrel to $109 this morning. Were it not for fracking in the Bakken regions of North Dakota and Montana helping to increase supply and keep a lid on prices, the price of a gallon of gas might be much, much higher due to this crisis.
For all the talk of humanitarian interventions, our proposed military intervention is not the sort of activity we generally consider anywhere but the Middle East. There is plenty of outrageous activity around the globe to choose from if we truly were acting as the world’s policeman. Oil is the lifeblood of developed economies and the vast majority of it comes from the Middle East. This is about protecting our influence and preventing the spread of instability to the oil producing countries. You can forget all the other arguments.
A remarkable visual from the equally remarkable “40 Maps…” demonstrates the shift of economic power and wealth eastward, a trend that began in 1950 reversing 2000 years of movement to the west.
For supporters of stronger regulation, it comes down to a choice between someone they do not know and someone they do not trust.
That is the NY Times reprising the outside-the-beltway attitudes towards the two leading candidates, Janet Yellen (“do not know”) and Larry Summers (“do not trust”), for Chair of the Federal Reserve, when Ben Bernanke retires early next year. Count me among those “supporters of stronger regulation” with serious misgivings about Mr. Summers. I fault his role in political decisions that contributed mightily to the severity of the 2008 financial crisis, specifically beating back the Commodity Futures Trading Commission’s attempts in the late 1990s to bring regulatory oversight to the then-nascent world of private derivatives contracts between regulated banks.
After the financial derivatives-driven 1994 bankruptcy of Orange County and spectacular collapse of Long Term Capital Management in 1998, an event itself that threatened to bring down the financial system at the time, Mr. Summers, then a senior official in the Clinton Administration, testified to Congress “the parties to these kinds of contract are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves.”
It would take another ten years for the full consequences of this set of beliefs to be fully manifested in the failures of Bear Stearns, Lehman, AIG, Fannie Mae, Freddie Mac and the near collapse of the global banking system. However, everyone learns from his mistakes and if Mr. Summers, the frontrunner in this race, becomes the next Fed Head, one can only hope he has learned from his.
Perhaps it is time the pendulum swings the other way and retirement returns to its original intent—as optimal workforce nonparticipation rather than self-enriching entitlements voted in by popular demand and aided by governments which are uninterested in acknowledging a crisis …
What Hsu is saying is that the concept of retirement – as formulated initially in the late 19th century in England and greatly expanded upon in the post-Depression era in the US, was originally meant as a way to ration labor. In other words, to prevent the very young and the very old from occupying employment positions that could be more profitably filled by more able workers in their 20s-50s.
Retirement then gradually evolved into an entitlement program post WWII, allowing older citizens of developed nations to retire in a comfortable lifestyle. The article points out that this model is likely unsustainable in developed economies and has perhaps even outlived its societal purpose.
Marketplace: “I do wonder whether you read Robert McNamara’s memoirs when it came out”
Rumsfeld: “I have not”
Marketplace: “That book was widely seen as an apology for his role in Vietnam. I looked in this book pretty hard for any rule you might have about apologizing and I couldn’t find one”
Rumsfeld: “And? What is your question?”
Marketplace: “Did you ever think about apologizing?”
From the Political Insider
I try very hard to avoid political commentary in this space. But as this particular exchange involved decisions that cost American taxpayers some $2Trillion, and counting, or about $6,500 per US living citizen, I thought it bore some relevance to the economic predicament we find ourselves in today.
The U.S. is well on its way to ridding itself of a decades of dependence on foreign oil. Given that our need for oil has played a part in most of the ugly and costly military entanglements we have gotten ourselves into the last 50 years, I can hardly imagine any better news. From Iran to Venezuela, with stops in places such as Iraq and Nigeria, the US has embedded itself with oil-producer governments in places we would have best kept our distance from.
NBC News starts a four-part series examining how fracturing, or “frakking,” has opened up the production of vast quantities of domestic oil and gas. Communities from West Texas to North Dakota are witnessing the equivalent of a new gold rush. Combined with reduced demand through conservation efforts, our demand for foreign oil has declined precipitously in the past 3-5 years.
The development of fracturing technology comes at some environmental cost and the arguments are already contentious. But to my mind, until we move away from our economic dependence on carbon-based fuels, I would rather have domestic battles over environmental problems than be compelled to engage in both covert and “hot” military ones to protect access to needed energy.
1. Obama can’t sell entitlement cuts to his base, or indeed Democrats in general, without Republicans agreeing to new revenues, and has offered them a straightforward compromise — one that would anger the base on both sides — based on the premise that total victory for the GOP is not an acceptable or realistic outcome.
2. Republican leaders can’t even begin to acknowledge that Obama has offered them a real compromise, because they can’t sell their base on the idea that the President is being flexible, let alone get them to seriously entertain accepting any compromise with him, because the base sees total victory over Obama as the only acceptable outcome.
I try to avoid getting into the middle of these very partisan political fights, but the nation’s problem with longer-term deficits is one that will have to be addressed in a rational manner. In the above quote, the WP’s Greg Sargent sums up the issue so succinctly that both sides should be able to understand what the solution is.
The federal government, the nation’s largest consumer and investor, is cutting back at a pace exceeded in the last half-century only by the military demobilizations after the Vietnam War and the cold war.
With all the media attention on out-of-control government spending, the sentence above from yesterday’s NY Times should come as a major surprise to most of us. Did to me. The article continues:
Federal, state and local governments now employ 500,000 fewer workers than they did on the eve of the recession in 2007, the longest and deepest decline in total government employment since the aftermath of World War II.
These cutbacks have acted as a headwind for the economy and further scheduled cuts, as well as the looming sequester, are expected to add to the braking effect on economic growth. According to the Concord Coalition, the only areas of government spending expected to grow in the years ahead are Social Security and Medicare/Medicaid. And interest payments on the accumulated debt.
This startling assertion is put forth by Mish Shedlock and supported by this graph from raw BLS data below. Note the red line, of over-55 workers in the labor force, is the only one rising.
In my October client letter, I had discussed how more and more Americans were delaying retirement, by choice or necessity, causing the over-65 demographic to be the fastest growing segment of the labor force.
But this new set of data is remarkable and speaks to the true depth of the persistence of the unemployment problem for the majority of those in labor force, whether they are just getting out of school or are in mid-career.