- Vaccination rates are plummeting across the nation, from conservative rural areas to urban areas such as Los Angeles — including children at top Hollywood schools.
- A large fraction of America believe that not only has warming of the surface atmosphere temperature paused (correctly, ignoring the activists’ propaganda), but that the Earth has not been warming during the past two centuries (quite daft). See the polls here.
- A large fraction of America not only have incorrect beliefs about current economic theory (ask a conservative about Keynes, you’ll hear the equivalent of confusing Einstein with a rodeo circus clown), and instead believe a long list of obviously false things. Wrong facts about history, and “zombie economics” (false but too politically useful to die).
We could make a long list of causes for this. Here are a few of the major factors.
Looking at this from a broad perspective, our confidence in our institutions was undeserved. Perhaps we’re over-reacting in the other direction. So much of what we believed about America was false: about JFK the family man. About the CIA and FBI and NSA. About the lies of government officials bringing us into the Vietnam and Iraq Wars.
More specifically, our confidence in scientists was undeserved. Perhaps we’re over-reacting in the other direction. Scientists first found the links between smoking and cancer in the 1930s, yet corporate money (and paid scientists) kept this from widespread public attention until the 1950s — and from public policy action until 1966 (the first warning labels). There are countless similar cases of scientists supporting their employers’ interest against the public’s welfare.
Perhaps worse, we’re learning that much — or even most — scientific research cannot be replicated (see links below). It works for the interests of the careers of the scientists involved — and those interests funding them. Which is all that matters.
Why are we surprised?
Summary: I don’t believe I’ve successfully communicated to our readers the extraordinary nature of our times. We too often focus on the details, but ignore this essential aspect of our situation. Since the crash (perhaps starting even before) we’ve sailed beyond the edges of the known economic “space”. We can no longer even see the edges of the map.
Normal science, the activity in which most scientists inevitably spend almost all their time, is predicated on the assumption that the scientific community knows what the world is like. Much of the success of the enterprise derives from the community’s willingness to defend that assumption, if necessary at considerable cost. Normal science, for example, often suppresses fundamental novelties because they are necessarily subversive of its basic commitments.
— Thomas Kuhn’s Structure of Scientific Revolutions (1962)
Look at the US economy. Marvel at the oddness.
- Near-zero interest rates since December 2008 — almost 6 years — scheduled to end in Q2 or Q3 of 2015.
- Three rounds of quantitative easing (ending this month) taking the Fed’s balance sheet from $800 billion to $4,500 billion.– a trillion dollars added in the past year.
- A mind-bending expansion of the Federal public debt, taking it from $5.1 trillion to $12.9 T (x2.5) — with $809 billion added during the fiscal year just ended (a 6.8% increase, equal to 4.7% of GDP).
That the economy needs such large stimulus in the sixth year of an expansion is unprecedented. Usually by now the economy has overheated from too-fast growth (inflation!), and economists are speculating about the next recession.
How we got here is equally strange. Like the Harry Potter books, since 2007 life has been a series of random plot twists. It will make a great novel; the film adaptation might be even better.
- The long-expected housing bust,
- followed by the collapse of some US investment banks,
- then the collapse of the US banking system, shaking banks around the world,
- followed by the collapse of world trade and a global recession in late 2008 (worst since the 1930s),
- met by near-zero interest rates, a first round of quantitative easing (QE), and fiscal stimulus,
- sparking a “v” shaped bounce in 2009, amidst predictions of return to normal growth,
- which by late 2010 faded into another slump (real GDP in Q1 2011 was -1.5% SAAR),
- successfully met by another round of fiscal stimulus and a second round of QE,
- followed by predictions of return to 3% GDP in 2012,
- which didn’t happen (GDP peaked in Q4 2011 at +4.6%),
- followed by GDP slowing to near zero in Q4 2012,
- met by a third round of QE in September 2012 (ending this month),
- and more forecasts of big growth in 2014, which didn’t happen (current estimates for 2014 are slightly above 2%).
Plus we saw a series of equally astounding events in Europe starting with the Greece bust starting in March 2010. And the July 2012 announcement that the ECB would “do whatever it takes to preserve the euro”. And the December 2012 “hail Mary” pass of Abenomics in Japan, attempting to end their quarter-century slump before the government goes bust.
Summary: We’ve reached a critical point in this business cycle. We enjoyed the years of fiscal and monetary stimulus; now comes the dismount. Only after the stimulus ends will we learn the true strength of our economy. Today we look at the monthly jobs report, perhaps the single most important indicator. Three graphs tell the story, cutting through the fog of confusion spread by the news media.
- Why we’re ignorant and confused
- The weak good news: more employed
- The bad news: percent employed
- More bad news: wages
- For More Information
(1) Why we’re ignorant and confused
Reports about the monthly jobs report illustrate why we’re confused and so often ignorant about important aspects of our lives.
- We get numbers without context. Raw numbers by themselves tell us little; the percent change has meaning. Also useful are descriptions of the trend and adjustments for inflation (vital when looking at long-term changes).
- We get detailed analysis of noise, lavish attention to tiny monthly fluctuations — changes usually smaller than the data’s error bars.
Instead let’s focus on the big things. Three graphs tell the story about the September jobs report. I have been showing readers these numbers for years. The first big story is that these trends have not changed.
Before we start, remember the price paid for this expansion. Five years of near-zero interest rates (since December 2008) — ending in Q2 or Q3 of 2015). Three rounds of quantitative easing — ending this month. And an mind-bending expansion of the Federal public debt — $809 billion added during the fiscal year just ended (a 6.8% increase, equal to 4.7% of GDP). That the economy needs such large stimulus in the sixth year of an expansion is unprecedented (usually by now the economy has overheated from too-fast growth) — and is the second big story.
Now comes the dismount, when we must dial the stimulus down to zero. Understanding the trend helps us prepare for what might happen next.
(2) The weak good news: more employed
Steady slow growth at about 2% now in its fourth year. We’re not in a recession. No signs of the often-predicted acceleration.
(3) The bad news: per cent employed
The percent of people in their prime years (16 – 64) who are employed peaked in 2006, fell in 2007 – 2011, and has only weakly recovered since then (back to the level of 1984, reversing much of the long increase from women entering the work force). There are many factors affecting this, but the trend since 2006 probably reflects weakness not strength in the US economy.
Summary: Today we have another guest post by film critic Locke Peterseim, a review of The Hobbit: The Desolation of Smaug. He shows how Hollywood transforms Tolkien’s small story into The Fast and Furious visits Middle Earth, draining away its character and meaning (much as they did in the last two of the three Lord of the Rings films). Post your comments about the film — and this review!
By Locke Peterseim
14 December 2013
Reposted here with his generous permission
Well, it’s better — at least more entertaining – than last winter’s first Hobbit film. So there’s that.
But, like Gandalf and his fellow wizards and elf lords catching vague feelings of growing darkness in the wind, for us long-time Tolkien fans (and us fans of Peter Jackson’s decade-old Lord of the Rings film trilogy) there’s a creeping sense that exactly what makes Desolation of Smaug work more effectively as popcorn entertainment is an on-screen death knoll for everything that made Tolkien’s works so special.
The Hobbit: The Desolation of Smaug is an action film, pure and simple; constantly jumping, spinning, and grabbing at our YouTube-ravaged attention spans.
Sure, the battle with the Mirkwood spiders was Tolkien’s idea, but everything else comes from Jackson and co-writers Fran Walsh and Philippa Boyens turning relatively low-key moments like the barrel escape from the wood elves and Bilbo’s initial parlay with Smaug into full-blown action set-pieces.
As in An Unexpected Journey, the first half of Smaug is driven by a pack of hunting orcs on warg-back, whipping the narrative along at every turn. (And once again, Jackson et al insert yet another new orc big baddie into the story to act as a more visceral antagonist. You know, because A Giant Fricking Dragon wasn’t enough.)
Nothing is ever allowed anymore to just happen in the Hobbit films — everything has to be ratcheted up, drawn out, enhanced and turbo-charged. Even Bard the Bowman’s fateful Black Arrow is no longer a simple, lucky shaft, but part of a giant Super Weapon. (The character of Bard — played with Aragorn-like stoicism by Luke Evans — is equally inflated, complete with a family of adorable moppets for that extra “threat to the family” juice.)
Summary: Reading news about trends and events without explanations of why provides entertainment, but seldom gives actionable insights — whether for individual action or public policy initiatives. Now we have the explanation for the boom in what seemed like unsustainable subprime auto lending: new technology makes it profitable.
“When I was sixteen, I went to work for a newspaper in Hong Kong. It was a rag, but the editor taught me one important lesson. The key to a great story is not who, or what, or when, but why.”
— Elliot Carver, in Tomorrow Never Dies (1997)
The increase in auto lending to subprime borrowers — on mad terms — has boosted auto sales (25% of loans have durations of 82-84 months; the average loan-to-value is 0ver 100%). The combination of high levels of subprime borrowing and easy terms is odd — especially so soon after the massive consumer defaults of 2008-09.
Many articles that describe this situation imply that lenders have become imprudent or even mad. I’ve done so (see the posts listed in the last section below). That’s sloppy analysis. “Why” is usually the vital question to ask, although often the most difficult to answer. What has changed to make lenders comfortable making such loans?
The New York Times provides the answer: it’s new technology:
24 September 2014 — Opening:
The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start. The cause was not a mechanical problem — it was her lender.
Ms. Bolender was 3 days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March.
“I felt absolutely helpless,” said Ms. Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June.
This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn.
Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.
But before they can drive off the lot, many subprime borrowers like Ms. Bolender must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. Using the GPS technology on the devices, the lenders can also track the cars’ location and movements.
Summary: Today we have another guest post by film critic Locke Peterseim, reviewing The Lone Ranger. He explains that it shows a new paradigm: go to the theater to see a spectacle. It works for us in New America, since even simple films were too deep for us — with plots, character development, and so forth. Now we watch big set-pieces loosely strong together, with some slapstick humor filler. Hollywood gives us what we want. It’s a bad sign that we want this. Post your comments about the film — and this review!
By Locke Peterseim
Reposted here with his generous permission
So, The Lone Ranger, yeah… Pirates of the Old West…
Johnny Depp, Buster Keaton, old-age make up… and so forth… a mystic loon with a dead bird on head, etc… Armie Hammer, “what’s with the mask?”, yes, that’s his real name and his real jaw… blah blah… ‘30s radio show, ‘50s TV show, Clayton Moore, Jay Silverheels… yeah yeah…and so on…
Pirates producer Jerry Bruckheimer, Pirates director Gore Verbinski, Pirates writers Ted Elliott and Terry Rossio (plus newbie Justin Haythe)… blah blah… Tonto-centric tale… revisionist reverence… blah blah…
Monument Valley, Once Upon a Time in the West, Little Big Man, Rango… blah blah blah… railroad, civilization, progress, future, justice, the law, corrupt American empire … and so on… bad guy eats a human heart… whatevs… anti-Native American racism, genocide, noble savage slapstick, buddy cop shtick… and all that… light comedy and tragical history, tonal and thematic incongruities… deeply offensive, exploitative… truth, legend, stories, fact… blah blah blah… big stunts, sloppy storytelling… too long… Silver steals the show… blah blah… Helena Bonham Carter, whore with an ivory leg… same old, same old, on and on…
All right, stop. Collaborate and listen. We’ve been going at this all wrong.
Summary: Now in its sixth year, this sorry excuse for an expansion is ready to boom — accelerating to “escape velocity” — according to many economists. Or perhaps the boom grows old, even sclerotic, so we should start watching for the next recession. The consensus of economists never sees a recession until it begins, so we’ll have to find other ways to look ahead. This post describes one such: the economy slowing to its “stall speed”. This alarm might be flashing yellow, or even red, now.
- Echoes of Japan
- What is “stall speed”?
- One reason we don’t grow
- For More Information
(1) “Echoes of Japan“
Economic Cycle Research Institute (ECRI), 22 September 2014 — Opening:
In 2011 the Fed published a study aimed at identifying “particular values for output growth and other variables, such that when these values are reached during an expansion, the economy has tended to move into a recession within a fairly short time span.”
The study concluded that Gross Domestic Income (GDI) – which, while income-based, is theoretically identical to Gross Domestic Product (GDP) – “provides a better measure of output growth than GDP,” and identified a two-quarter annualized real GDI growth rate of 2% to be the “stall speed” threshold.
… this GDI growth measure (see chart) has now stayed below the 2% “stall speed” threshold for three straight quarters starting in Q4 2013, which is much longer than the duration of the harsh winter weather. …
Real GDI crashed below 2% SAAR in Q2 2006. Before this cycle, since 1947 real GDI had fallen below 2% only once in a period not associated with a recession – in Q1 1993. Real GDI is now below 2% YoY. For the past 3 quarters (and 4 of past 5 quarters) it’s been below 2% SAAR on a QoQ basis.
(2) What is stall speed?
The concept of a “stall speed” is that the economy slows in the year before falling into a recession, and there is a critical speed below which the economy is likely to fall into recession.
The idea of a “stall speed” became know after a 2011 Fed paper by Jeremy J. Nalewaik, who showed that it predicted recessions better than other methods — and better than the Blue Chip Economists’ Forecast. It appears seldom in Fed research after several other articles in 2011, such as these by the Cleveland Fed and the Atlanta Fed).
On the other hand, several studies have been skeptical about the concept, such as this 2012 BIS working paper which questioned even the aeronautical analogy.
The rate of technological progress has slowed, broadly speaking since the 1960’s. The most commonly cited example is the speed of flight. The astronauts of Apollo 10 traveled at 25,000 in 1969, the same year the first and only successful supersonic commercial airliner flew. Now we have neither.
Worse there are indications that the basic machinery of science has decayed. In recent years scientists have become aware that a too-large fraction of research studies fail when others attempt to replicate them (see this in the Economist). Confirming the rot are the increasing number of retractions, including some of high-profile papers (see this in the NYT).
These might be symptoms of deeper structural problems in the vast science research apparatus that’s grown in the US since WW2. The best analysis I’ve seen in this from the always-interesting The Baffler. Here is an excerpt; it should be read in full (I recommend subscribing).
By David Graeber
Prof Anthropology, London School of Economics (Wikipedia bio)
The Baffler, issue #19 (2012)
“The journal that blunts the cutting edge”
What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.
My own knowledge comes from universities, both in the United States and Britain. In both countries, the last thirty years have seen a veritable explosion of the proportion of working hours spent on administrative tasks at the expense of pretty much everything else. In my own university, for instance, we have more administrators than faculty members, and the faculty members, too, are expected to spend at least as much time on administration as on teaching and research combined. The same is true, more or less, at universities worldwide.
The growth of administrative work has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level. What they end up meaning in practice is that everyone winds up spending most of their time trying to sell things: grant proposals; book proposals; assessments of students’ jobs and grant applications; assessments of our colleagues; prospectuses for new interdisciplinary majors; institutes; conference workshops; universities themselves (which have now become brands to be marketed to prospective students or contributors); and so on.
Summary: 25 years ago 5 men published one of the seminal articles in modern military theory, introducing the concept of 4th generation war. They did so at the start of a new cycle of conflicts for America. America would be much stronger today had we listened. As we start new wars, it’s vital that we understand (better late than never) what is now the dominate form of war, why we failed to listen, how we (and other nations) fail fighting foreign 4GW foes, and how we can do better. We’ll be running articles on this theme during the next month.
Kicking off this series is a note by Chuck Spinney, one of our most acute observers of the US military.
Franklin “Chuck” Spinney
From his website, The Blaster
21 September 2104
Posted with his generous permission
Uri Avnery’s thoughtful essay Scotland on the Euphrates questions the future viability of the nation-state as a form of social organization. His concerns are not new, although as Avnery noted, recent events certainly make them more believable — or less unbelievable to those who opine for the comforting stasis predicted by Fukyama’s silly postulation of the “end of history.” The Israeli military historian, Martin van Creveld, has been making arguments along these lines for years (e.g., The Rise and Decline of the State, 1999). And van Creveld was not the only one to address the emerging problems of sustaining the nation state in the emerging world.
Twenty-five years ago, in October 1989, four active duty military officers (2 marines and 2 army) and one civilian military historian wrote a prescient article in the Marine Corps Gazette, entitled “The Changing Face of War: Into the Fourth Generation”. At that time, the Gazette was edited by Colonel John Greenwood (USMC Ret.); and thanks to him, the Gazette was by far the most stimulating, vibrant, and spunky of the professional military journals. The article initially attracted a lot of attention, but unfortunately 4GW became a buzzword in some overly enthusiastic circles. To make matters worse, the buzz triggered sharp resistance in traditional circles. In my view, the authors’ warning became diluted by the intersection of uncritical enthusiasm with hardening resistance, and was missed entirely.
But their warning was timeless and is particularly appropriate for today. For example, they predicted the general outlines of why the drone war — the apotheosis of what the traditionalists call the military-technical revolution — is failing so miserably in the face of the kind of adversaries these authors identified. Some might argue that their paper is written from the narrow confines of European military history and variations of what they call 4GW have always been around, particularly in the East. But this is a red herring; a careful reading shows that they accounted for and agreed with both these points.