Summary: I try in these pages to convey the extraordinary oddness of our time, when a great nation carelessly destroying its strength and prosperity. Examples are easily found around us. The disregard for science by both Left and Right. Our mad foreign policy, multiplying enemies while discouraging friends. Our high-risk macroeconomic policies. Our apathy to the rot of both our infrastructure and our political regime. The restructuring of our society to build a New America on the ruins of the old. It’s an exciting time, with great trends buried amidst the trivia of the news! Today we try a new perspective from which to see these things more clearly.
America is powerful, our military supreme, our hegemony almost unchallenged.
We kill at will around the world.
We overthrow governments and occupy nations at our whim, careless of the consequences.
Our tech is the finest.
Our economy is the largest & among the strongest.
Yet increasing numbers of Americans fear we’re on the wrong path (see polls).
Here’s one story about America today.
A powerful and evocative story of our time by Michael Hartnett (Chief Strategist at BofA).
Borrowed from his report of 29 May 2014, it’s used in a different context than he intended.
“Sunshine in Hell“
The vast majority of economists expect the US economy soon to resume “normal” growth, as they have since the crash. That’s quite astonishing since GDP has been slowing, not accelerating, from its post-crash sluggish trend of 2.2% — despite the third and largest round of quantitative easing. In 2012 GDP rose 2.8%; in 2013 +1.9%; and now economists estimate growth in 2014 to be slower than 2013 (the IMF expects +1.7%, assuming the second half speeds up to 3%+). It’s our slowest recovery ever by most metrics, one in which median real wages have not increased since before the recession began in 2007.
However anemic, the recovery has kept the public quiet while a New America is built around us. But we’re not all participating equally.
For example, consider our passive acceptance to the great looting of American business. First Private Equity firms perfected a new mode of capitalism: parasitism. Acquire businesses — hollow them out by throttling back capex and R&D (see this NYT article, the numbers look worse as % profits) — leverage them up — extract the cash — then sell them off. Now senior corporate executives have learned to do the same with public companies. Cut capex and R&D — leverage the company up — then extract the cash via the Triangle Trade of executive stock options to stock to buybacks. The result is a rapid increase of inequality, a host of executives in the 1%, and an America incapable of rapid growth.
It’s one of the great engines of inequality in our society, along with the increasingly dysfunctional education system and the flat tax system. For more information see the end of this post.
Looking at the 99%
We see the effects of growing inequality all around us, if we care to look. Not just in the conspicuous spending of the nouveau riche, but in the plight of the 99%. As in these stories from today’s news:
(a) “Higher Calling, Lower Wages: The Vanishing of the Middle-Class Clergy“, The Atlantic, 22 July 2014 — “As full-time pastors become a thing of the past, more and more seminary grads are taking on secular jobs to supplement their incomes.”
This story holds many lessons for us. Pastors sought middle class livelihoods through advanced education (the panacea!), getting masters degrees. As the middle class withers, their flocks can no longer support them, and the degrees are for naught (but the loans to fund them remain).
(b) “New York’s ‘Poor Doors’”, Ariella Cohen, Next City, 22 July 2014 — “It refers to a second entrance in a luxury condo building for tenants living in units reserved for lower-income renters. It has become shorthand for segregation of people based on how much rent they can pay.”
Sunshine in Hell
We enjoy the sunshine, but perhaps somewhere along the way we wandered into Hell. The gate basks in sunshine, but dark places lie ahead on the path. We can still turn back, returning to the true road for America. It’s a decision we will make together, one person at a time. But the clock runs on; time is not on our side.
For More Information
(a) Previous post about this: Watch corporations strip-mine their future (and ours), 18 April 2014
(b) Posts about About inequality & social mobility: once our strength, now a weaknesses.
(c) Recent forecasts and warnings:
- What can we expect from the US economy in 2014?, 21 February 2014
- Status report on the US economy: stand by for the boom!, 24 April 2014
- The next industrial revolution starts. Beware the Pied Pipers who lull us into passivity., 8 July 2014
- Economists forecast a boom soon. The numbers show slowing. Who is right?, 21 July 2014
(d) Articles about the new Triangle Trade:
- FactSet’s Buyback Quarterly, 18 June 2014 — Detailed analysis, with historical data. Especially note page 9, showing that massive buybacks have not reduced the number of shares outstanding (buybacks of shares created by executives’ exercise of their stock stocks are the link moving funds from the corporate treasury to executives’ pockets. It’s hidden compensation; changing nothing else).
- “‘Super managers’ governance spotlighted in economist Piketty’s blockbuster capitalism critique”, Reuters, 8 May 2014
- “The $2T Buyback Tax Ruse:Its a Free Tax Ride for Corporations“, Gordon T. Long, 7 July 2014
- “Corporate America Is Enriching Shareholders at the Expense of the Economy“, Douglas Skinner, 538, 15 July 2014 — He sees half the equation, but ignores the role of executive stock options and doesn’t notice that the total of shares outstanding are not dropping as fast as buybacks imply.
- “Who are Today’s Supermanagers and Why Are They So Wealthy?“, Carter C. Price, Washington Center for Equitable Growth, 16 July 2014
- “The Fed’s Financial Repression At Work: How Big Blue Was Turned Into A Wall Street Slush Fund“, David Stockman, 18 July 2014
9 thoughts on “America enjoys a time of sunshine in Hell. Let’s use the time wisely.”
When have nations, great or small, ever turned back from going over the brink? If that were possible, we’d probably still be speaking Assyrian now.
Nations often successfully survive great crises. The UK, France, and the US all experienced civil wars. Many, not all, regimes survived the Great Depression. Most nations healed quickly after WW1 and WW2.
Fabius, I’m now working on my parody of Dante’s Inferno.
I’ll have to follow your posts more closely.
That sounds like something worth reading!
If you’re economic projections are half accurate, I ain’t gonna make no money off of it.
But, then, Dante lived before the printing press, so he wasn’t on any best seller list either.
The forecasts I gave for 2014 are from economists.
It is a bit much to call my guesses “forecasts”, although they have been eerily accurate since 2010.
Eerily accurate forecasts.
Sounds like something my Dante parody could play with.
Not much new here, but ‘Dr. Housing Bubble’ has a nice update. Basically, young buyers are out of the market here in California. Low rates funded a buying spree by speculators, which jacked up prices, but that peaked 2013. Really, seems to me it has to be about wages — and those have been stuck.
Thanks for the link.
For a detailed analysis see “The State of the Nation’s Housing: 2014” by the Joint Center for Housing Studies of Harvard. Section 4 on Homeownership has a detailed analysis about affordability for young people. Homes are “affordable” by their standards if people spend less than 43% of their gross income on housing. For a household with income of $42,000 that leaves $2,000 per month to live on — before taxes. Affordability doesn’t leave much for food and other non-essentials.