Hold the hysteria. The US economy is OK, so far.

Summary: The economy is slowing. We are probably not in a recession, let alone beginning the end times depression doomsters have so often predicted. On the other hand, continued slowing seems likely, and a little more and we will have a recession. Let’s look at some key indicators.  {First of two posts today.}

Economy

Contents

  1. Manufacturing; one piston of the US economy’s engine
  2. Transportation and trade
  3. The Bottom Line: US & world growth
  4. For More Information

 

(1)  Manufacturing; one piston of the US economy’s engine

Zero Hedge: “Durable Goods Devastation…Scream Recession

December’s Advance Report on Durable Goods  shows a continued slow decline, especially new orders. The monthly decline in December was large, but not unusually so for this volatile data. It doesn’t scream “recession”.

December 2016 Durable Good New Orders: MoM, SA

Nor does the year-over-year decline of 1.7% SA scream “recession”. It is not even unusual. New orders often decrease without a recession following; it has happened several times during this expansion. The data only goes back to 1993.

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Karl Popper explains how to open the deadlocked climate policy debate

Summary: Many factors have frozen the public policy debate, but none more important than the disinterest of both sides in tests that might provide better evidence — and perhaps restart the discussion. Even worse, too little thought has been given to the criteria for validating climate science theories (aka their paradigm) and the models build upon them. This series looks at the answers to these questions given us by generations of philosophers and scientists, which we have ignored. This post shows how Popper’s insights can help us. The clock is running for actions that might break the deadlock. Eventually the weather will give us the answers, perhaps at ruinous cost.

“Confirmations should count only if they are the result of risky predictions; that is to say, if, unenlightened by the theory in question, we should have expected an event which was incompatible with the theory — an event which would have refuted the theory.”
— Karl Popper in Conjectures and Refutations: The Growth of Scientific Knowledge (1963).

“I’m considering putting “Popper” on my list of proscribed words.”
— Steve McIntyre’s reaction at Climate Audit to mention that Popper’s work about falsification is the hallmark of science, an example of why the policy debate has gridlocked.

This graph creates a high bar for useful predictions by climate models

Global fossil carbon emissions

From the Department of Energy’s Carbon Dioxide Information Center.

What test of climate models suffices for public policy action?

Climate scientists publish little about about the nature of climate science theories. What exactly is a theory or a paradigm? Must theories be falsifiable, and if so, what does that mean? Scientists have their own protocols for such matters, and so usually leave these questions to philosophers and historians or symposiums over drinks. Yet in times of crisis — when the normal process of science fails to meet our needs — the answers to these questions provide tools that can help.

A related but distinct debate concerns the public policy response to climate change, which uses the findings produced by climate scientists and other experts. Here insights about the dynamics of the scientific process and the basis for proof can guide decision-making by putting evidence and expert opinion in a larger context.

A previous post in this series (links below) described how Thomas Kuhn’s theories explain the current state of climate science. This post looks to the work of Karl Popper (1902-1994) for advice about breaking the gridlocked public policy debate about climate change. At the end of this post is the best-known section of his work about this.

Popper said scientific theories must be falsifiable, and that prediction was the gold standard for their validation. Less well known is his description of what makes a compelling prediction: it should be “risky” — of an outcome contrary to what we would otherwise expect. A radical new theory that predicts that the sun will rise tomorrow is falsifiable by darkness at noon — yet watching the dawn provides little evidence for it. Contrast that with the famous 1919 test of general relativity, whose prediction was contrary to that of the then-standard theory.

How does this apply to climate science?

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Playing The Bubble Game: Investing In The 21st Century

Summary: Investment commentary these days overflows with mentions of bubbles. The concept is vital to understanding our economy yet encrusted with myths in the minds of most investors. This post cuts through those to the known history and theory of bubbles. As usual with economics, this gives us clues about the future – but only clues.  {Second of two posts today.}

  • We’re in an era of bubbles, but they’re masked by myths.
  • Understanding their history and dynamics can guide our investing.
  • Bubbles create high risks not easily managed.
  • Failure to prepare for these risks has created serious losses, and will do so again.

Bubbles

Bubbles in history

“You Can’t Cheat An Honest Man.”
Title of W. C. Fields’ 1940 movie, harshly and cynically describing the essence of bubbles.

Bubbles are an inherent aspect of free market systems, easily produced in classroom exercises. Whether managing a nation or a portfolio, they must be understood.

Those who lived through the giant 19th century UK and US investment bubbles would find our bubbles quite familiar. Journalist and promoter Charles Mackay participated in several, and the scars from them led to his bitter polemic Extraordinary Popular Delusions and The Madness of Crowds. See more about this history in “Charles Mackay’s own extraordinary popular delusions and the Railway Mania” by the brilliant Andrew Odlyzko (Prof Mathematics, U MN).

Then and now, bubbles have common characteristics.…

Read the rest at Seeking Alpha. Post your comments there.

Our future will be Jupiter Ascending, unless we make it Star Trek

Summary: Will our future be like Star Trek or Jupiter Ascending? Star Trek shows us a world beyond scarcity where everybody benefits. In Jupiter Ascending the 1% takes the wealth produced by technology and uses it to rule us. We can choose to make Star Trek our future if we are willing to work for it, but now we’re condemning our children to live in Jupiter Ascending.  {First of two posts today.}

Jupiter Ascending

“No, I don’t share my wealth. Why do you ask?” From Jupiter Ascending.

Consider the increase in the West’s wealth since 1750 and the advancement in technology. Imagine similar progress for another 250 years, to the time of the original Star Trek TV series. Rick Webb describes that world in “The Economics of Star Trek: The Proto-Post Scarcity Economy“, a market economy whose productivity allows the government to easily provide a high basic income allowance to everybody.

The amount of welfare benefits available to all citizens is in excess of the needs of the citizens. … Citizens have no financial need to work, as their benefits are more than enough to provide a comfortable life, and there is, clearly, universal health care and education. The Federation has clearly taken the plunge to the other side of people’s fears about European socialist capitalism: yes, some people might not work. So What? Good for them. We think most still will.

Discussions about Star Trek often focus on what we do with the abundance of goods and services produced by their fantastic tech. It’s fun, like composing fantasy football teams or designing the ideal Prime Directive.

In our world the 1% shows us an alternative to Star Trek. The largest fraction of America’s increased income since 1970 has gone to the 1% — and even more to the .1%.  They could share the booty (nobody can consume a billion dollars in a lifetime), but prefer instead to amass wealth and power. Why would this change with the invention of robots and replicators? Continue current trends for a few centuries and you reach Jupiter Ascending — a world of servants and lords, where the rich own planets, live almost forever, and harvest the peons. A world like that of our past, as seen in Pride and Prejudice.

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About America’s biological attack on the Ukraine army

Summary: This month’s hot undernews concerns the small epidemic in Ukraine, said to be caused by release of the California Flu from a US research lab. Here we do the usual diagnostic, tracing the story from its origin as propaganda by rebels to its appearance as exciting news on popular websites. How many people have come to believe this story? We have to do better if we’re to regain control of America.

Bacteria

DPR Defense Ministry: Situation Report” posted by the Donbass International News Agency (DNI News), 22 January 2016 — Press release by Eduard Basurin, Vice-Commander of the Defence Ministry Corps of the Donetsk People’s Republic (rebels in eastern Ukraine). Money paragraph (bold in original)…

“According to the medical personnel of the AFU {Armed Forces units of the Ukraine} there were recorded mass diseases among the Ukrainian military personnel in the field. Physicians recorded the unknown virus as a result of which the infected get the high fever which cannot be subdues by any medicines, and in two days there comes the fatal outcome. Thus far from the virus there have died more than twenty servicemen, what is carefully shielded by the commandment of the AFU from the publicity.”

The next I see is “Deadly virus leaked from US laboratory in Donbass – DPR Army and Intelligence“, also posted by DNI News, 22 January 2016. It adds more detail.

“More than 20 Ukrainian soldiers have died and over 200 soldiers are hospitalized in a short period of time because of new and deadly virus, which is immune to all medicines. Donetsk People’s Republic intelligence has reported that Californian Flu is leaked from the same place where research of this virus has been carried out. The laboratory is located near the city of Kharkov and its base for US military experts. Information from threatening epidemic is announced by Vice-Commander of Donetsk Army, Eduard Basurin.”

The story was picked up by several dozen websites. It hit the big time rumor-mill with “US Unleashing Deadly Virus in Donbass, Ukraine?” by Stephen Lendman (bio here) at the Center for Research on  Globalization, on January 24. Lendman reports as fact this propaganda from the Russia-backed rebels (the Donetsk People’s Republic has not been recognized by any nation).

Other websites re-broadcast the story, including some overseas — such as “20 Dead, 200 Hospitalized After US Lab ‘Leaks’ Deadly Virus In Ukraine” posted by Macedonian International News Agency on January 25. The story hit the major leagues when Zero Hedge posted “20 Dead, 200 Hospitalized After Reports US Lab ‘Leaks’ Deadly Virus In Ukraine” on Jan 25. With that boost it became a clickbait extravaganza.

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Review of Mike Lofgren’s “The Deep State”, a must-read for 2016

Summary: Today’s post reviews Mike Lofgren’s important new book about The Deep State, the ruling center of the New America. Lofgren’s entertaining but scary book sketches out this institution and how it works. Here’s an explanation of why you should read the book, and its two big limitations.

 

Review of

The Deep State:
The Fall of the Constitution
and the Rise of a Shadow Government

by Mike Lofgren (2016)

 

Mike Lofgren has written the definitive account of the Deep State, the “hybrid association of key elements of government and pats of top-level finance and industry that is effectively able to govern the United States with only limited reference to the consent of the governed.”

His has the experience to do so after 28 years as senior budget and national security expert with the Republican staff in Congress. It gives him technical knowledge plus a wealth of observations and vignettes, which he weavers into an entertaining narrative (see the Forward).

The Deep State is the hidden connecting thread to the news in America. It explains the government’s operations run with indifference to their stated goals, its leaders’ unconcern with failure, and the inability of citizens to affect its policies. The quiet growth of the Deep State is the story of modern America’s history.

“Our venerable institutions of government have outwardly remained the same, but they have grown more and more resistant to the popular will as they have become hardwired into a corporate and private influence network with almost unlimited cash to enforce its will.”

Lofgren explains the origins and operations of the Deep State, how it has shaped Washington to its needs and sent its tentacles throughout the American power structure. After reading this book you’ll see the news with a different perspective. It should be required reading for every college student.

Now for the critical part of the review. He goes too far in the middle of the book, almost a list of everything wrong with America — with the Deep State the master explanation. He sometimes conflates the Deep State with conservative forces, when its strength comes from its bipartisan support (everybody loves the F-35, and few are more hawkish than Liberals explaining our Responsibility to Protect).

But these are minor points in a brilliant, thoroughly researched, and well-written book. My disagreements concern two subjects about which we can only speculate.

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It doesn’t matter if Trump wins. 2016 is already a revolutionary election

Summary: The public, and so journalists, focus on the presidential elections as races, reasonable since the political consequences of each party’s victory are large but predictable. The 2016 election is different. Focusing on Trump’s latest outrageous sound-bite conceals the massive change made by his success to date. What if the parties’ control of political money and our political machinery no longer controls election results, and elections become a free-for-all among the power centers of America? This post explores what it means for our future.

USA Revolution: the Logo

 

Many factors produced the simultaneous insurgencies by Sanders and Trump against the Democratic and Republican establishments. Most obviously, for decades they have ignored vital concerns of their core constituencies, preferring instead to serve unpopular special interests such as Wall Street — and those of the 1% (e.g., favoring mass immigration).

A classic sign of organizations’ senescence is the increasing age of its leaders and their decreasing qualifications for high office. As seen in the candidates offered for President. In the case of John McCain in 2008, the Republicans gave us both — an erratic elderly man (would have been 73 at inauguration) with poor judgment and an unqualified VP (Sarah Palin, chosen with 21 months as Gov of AK).

Now the Boomers are turning over leadership of America, but the Democrats appeal to a new generation with two contenders: Hillary Clinton and Bernie Sanders, who would be 70 and 76 at inauguration.

These events take place in a nation where the people’s confidence in their governing institutions has been eroding away for decades (see Gallup’s Confidence in Institutions polls). Which brings us to this, the key insight about 2016 (although written long ago)…

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