Tuesday, November 25, 2014

Prosperity Amidst the Ruins

The fundamental problem facing the global economy is not slow economic growth but political inequality.


It's striking: as economies stagnate, the top tier is living even larger while the low-income masses sink further into marginalized poverty. I call this widening divide between the vested interests/wealthy and the rest of society prosperity amidst the ruins.

How can the top slice prosper while the rest of the populace suffers from higher taxes, stagnant wages and a collapse of employment/enterprise opportunities?

Just as Greece led the way in the sovereign debt crisis a few years ago, it is also leading the way in showing how oligarchies can expand their wealth and power even as their populace slides deeper into poverty. A recent article, Misrule of the Few: How the Oligarchs Ruined Greece, lays out the key dynamics.
It is self-evident that these same dynamics are playing out in the rest of Europe, the U.S., Japan, China and most if not all of the developing world.

Writer Pavlos Eleftheriadis pulls no punches:
"Greece has failed to address (rising wealth/income inequality) because the country’s elites have a vested interest in keeping things as they are. Since the early 1990s, a handful of wealthy families -- an oligarchy in all but name -- has dominated Greek politics. These elites have preserved their positions through control of the media and through old-fashioned favoritism, sharing the spoils of power with the country’s politicians. Greek legislators, in turn, have held on to power by rewarding a small number of professional associations and public-sector unions that support the status quo. Even as European lenders have put the country’s finances under a microscope, this arrangement has held."
This is the same script being used by vested interests everywhere:

1. Control the media so it focuses exclusively on manufactured "good news" ("the stock market hit a new high today, blah blah blah") and ignores the perverse incentives built into the system and the destructive consequences of crony-capitalism/crony socialism.

Anything that undermines the dominant narrative (i.e. thanks to your political-financial elites marvelous management, we have self-sustaining "growth") is buried, discredited or ignored.
2. Buy political favors and influence to insure that "reforms" are superficial public relations exercises rather than than actual reforms that change the power structure.

3. Rig the accounting, regulations and reporting so any scrutiny is misdirected or blunted. This enables the status quo to continue on unfazed, despite the erosion of the economy's fundamentals and the widening gap between those with power and those who are powerless, i.e. the middle class and the marginalized poor.

This simple script is working in China, the U.S. Japan--everywhere.

The vested interests have obscured the cold reality of rising inequality by focusing obsessively on "growth" as the fix-all to inequality.

But this is exactly backward. As Eleftheriadis observes:
"The fundamental problem facing Greece is not slow economic growth but political inequality. To the benefit of a favored few, cumbersome regulations and dysfunctional institutions remain largely unchanged, even as the country’s infrastructure crumbles, poverty increases, and corruption persists. Greek society also faces new dangers. Overall unemployment stands at 27 percent, and youth unemployment exceeds 50 percent, providing an ideal recruiting ground for extremist groups on both the left and the right. Meanwhile, the oligarchs are still profiting at the expense of the country -- and the rest of Europe."
All the blather about "growth" and GDP is just propaganda to misdirect our attention from the real problem: the total domination of governance and finance by a class of vested interests and mega-wealthy cartels/oligarchies.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, James M. ($20), for your superlatively generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Monday, November 24, 2014

Nothing Has Changed--and That's the Problem

Playing monetary games has done nothing to eliminate moral hazard.


If we step back and look at the past six years since the global financial meltdown of 2008, we see that in terms of financial and political power, nothing has changed--and that's the problem. If nothing has changed structurally, then none of the problems that caused the meltdown have truly been addressed.

All that's changed is the vast expansion of monetary games has masked the dysfunctional reality that the same old vested interests that had a death-grip on wealth and power in 2008 have tightened their death-grip in the past six years.

Here's the problem facing every nation and trading bloc:

1. Vested interests institutionalized moral hazard, separating their gains from the consequences of taking risks. This is also known as privatized gains, socialized losses: vested interests reaped the gains from risky speculative bets, but then passed the staggering losses onto the central banks and taxpayers while keeping the gains.

2. The vested interests control the machinery of governance, so there is no way the central state will force the vested interests to absorb the losses that are rightfully theirs. Instead of de-institutionalizing moral hazard, governments have spewed thousands of pages of complicated regulations, in effect, grudgingly nudging the barn door half-closed after the horses of systemic risk galloped away in 2008.

3. With moral risk still institutionalized, nothing has changed: all the gains from subprime auto loans, selling sovereign bonds issued by insolvent governments, etc., are private, and all the risk is being transferred to the central banks and taxpayers.

The money-printing of quantitative easing--central banks printing money to purchase sovereign bonds and mortgages--is actually a form of money-laundering, as all this expansion of central bank balance sheets, debt and liquidity enables the vested interests to expand their control of the financial and political power centers at the expense of everyone else.

Take a look at the vast expansion of debt and the modest impact of that debt on GDP

Look at the unprecedented expansion of the Fed's balance sheet and ask cui bono-- to whose benefit?

Since moral hazard--the disconnect of risk and consequence--is the fundamental cause of the global meltdown of 2008, the only solution is to eliminate moral hazard. By this I mean de-institutionalizing moral hazard.

But de-institutionalizing moral hazard means smashing the vested interests' primary engine of wealth and political power.

The only way forward is to assign the losses that have been piled up in the shadows to those who created and bought the risk for their own gain. That means the investment banks that originated the subprime mortgages and auto loans, etc., and the mutual funds, pension funds, wealth funds, etc. that bought them as "low-risk" investments.

Right now, we're bailing out the con-artists (the banks) and their credulous marks-- the suckers who foolishly trusted the grifters of Wall Street, London, Shanghai, etc.

This re-linking of risk and consequence is not only the only moral way forward--it's also the only political and financial way to clear the poison of moral hazard from the system.

Saving vested interests from the losses they earned and they deserve poisons the entire financial system. When the poisoned system finally collapses, it will destroy everyone with a stake in the system--including the vested interests who reckoned that their political power would save them from the losses that are rightfully theirs.

Playing monetary games has done nothing to eliminate moral hazard; indeed, playing monetary games cannot possibly eliminate moral hazard, as monetary policy enforces moral hazard.

Those playing monetary games--Kuroda, Draghi, Yellen et al.--will discover this, but only after it's too late to stop the slide into the abyss.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.
Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Sriram E. ($75), for your outrageously generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Sunday, November 23, 2014

Central Banks: When We Succeed, We Fail

Goosing stocks ever higher will eventually push wealth inequality to the point that it unleashes social instability.


Central banks around the world share a few simple goals:

1. Defeat deflation by sparking inflation--in the cost of goods and services, not wages.

2. Weaken the currency to boost exports and counter beggar thy neighbor devaluations by other exporting nations and trading blocs.

3. Boost the value of stocks to keep pension plans afloat and project a politically powerful message of "growth" and "prosperity."

What no central bank dares say is what happens should they manage to boost inflation, devalue their currency and continue pushing assets higher: when we succeed, we fail.

Consider the consequences of juicing inflation: every click up in inflation further reduces the purchasing power of wages, which do not keep up with inflation in a world of labor surplus.

When central banks succeed in jacking up inflation, they will fail the households and enterprises whose income is stagnating or declining:Were European Central Bank head Mario Draghi honest, here is what he would say:

Devaluing one's currency is another way of pushing down the purchasing power of households' income and savings. Were Bank of Japan head Haruhiko Kuroda honest, here is what he would say:

Goosing stocks ever higher will eventually push wealth inequality to the point that it unleashes social instability. Were Federal Reserve chair Janet Yellen honest, here is what she would say:

Should central banks succeed in jacking up inflation, devaluing the purchasing power of fiat currencies and pushing stocks to the moon, they will have failed their citizenry. Should they succeed in reaching their goals, they will trigger catastrophic instability.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Guy T. ($50), for your marvelously generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Saturday, November 22, 2014

The Astonishing Rise of Central Bank Fear

Anyone who looks at central bankers speak can sense the fear behind their absurd bravado, and the dishonesty of their public confidence.


The extraordinary disconnect between soaring stock markets and stagnating real economies has been gleefully embraced by all who benefit from the disconnect:

The financial media, brokerages, investment banks, politicos who have made stocks the barometer of "prosperity" and of course the top 5% who own roughly 3/4 of the financial assets of the nation.

Even more extraordinary is the rise in central bank fear that has unleashed extremes of monetary policy. If the real economy is as great as advertised, then why are central banks dropping monetary neutron bombs on a nearly weekly basis?

What are they so afraid of? And if they're not afraid of something, then why are they constantly hyping their threadbare commitment to "do whatever it takes," pushing real interest rates into negative territory and buying stocks and bonds hand over fist?

I've prepared a chart depicting central bank fear, the stock market and the real economy. As central bank fear/panic pushes higher, the banks have unleashed a torrent of PR and monetary programs that have dragged stocks higher with every phony pronouncement and every new free money for financiers chumming of the stock market.

No wonder the feeding frenzy never stops--the central banks are clearly terrified of what will happen should they stop dumping monetary chum in the waters.

What is equally extraordinary is the abject failure of all the central banks' free money for financiers to move the needle of the real economy. Virtually every bright spot in the economy results not from organic growth but from the expansion of a new credit bubble: for example, subprime auto loans.

After tens of trillions of dollars in stimulus and trillions squandered on asset purchases to suppress interest rates and prop up the stock market, the real economies are drifting into recession or stagnation.

The central bank response to this abject failure? More free money for financiers.
Anyone who looks at central bankers speak can sense the fear behind their absurd bravado, and the dishonesty of their public confidence. They're not just afraid--they're in a panic. Every press conference and every announcement is supposed to express confidence, but what they really express is terror: terror that doing more of what failed spectacularly will not just stop working--it will trigger the collapse of the entire rotten, corrupt system of central banks and free money for financiers.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Blake T. ($40), for your superbly generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Thursday, November 20, 2014

Have Central Banks Entered an Undeclared War?

The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy.


I recently suggested that the devaluation of the yen was Japan's Monetary Pearl Harbor: a direct attack on the currencies of its major trading partners: the euro (European Union), the won (South Korea), the Australian dollar (AUD) and the U.S. dollar (USD), which affects both the U.S. and China since China's currency, the renminbi, is pegged to the USD.

Though there have been no overt (that is to say, public) counter-attacks, this may not reflect monetary peace so much as an undeclared war. Correspondent Mark G. observed that the current geopolitical backdrop is considerably more unsettled than the relatively benign global chessboard in 2008:

"The Eurozone and the Pacific Rim now have a pair of regional wars being fought out primarily by financial and monetary means. We can infer that the major central banks won't be anywhere near as cooperative during a crisis as they were in 2008."

While the American-European financial sanctions against Russia and Russia's counter-moves are being waged in public, the public response of the Korean and Chinese central banks to Japan's massive devaluation has been limited to grumbling.

But it is unlikely that other central banks are limiting their response to Japan's aggressive devaluation to words.

Let's start by noting that central banks play two games: one is pure public relations: marionettes on strings beat deflation with sticks and declare they'll save financial parasites with "whatever it takes" monetary policies.
Meanwhile, their actions may be mere shadows of the bold policies being trumpeted, or they may be extremes nobody dares make public, for example the Federal Reserve's $16 trillion bailout of literally the entire Western banking sector in the last Global Financial Meltdown.

(The Levy Institute came up with $29 trillion after poring over all the data):

The U.S. Fed has remained mute, but the yen devaluation has destabilized the global monetary order, whether the Fed acknowledges it publicly or not.

Unsurprisingly, central bank public statements don't mention that competing devaluations share certain characteristics with circular firing squads. Beggar thy neighbor policies destabilize currency flows, and from there, imports and exports, and from there, domestic regimes.

Is there a beneficiary of devaluations and shadow currency wars? It's not too difficult to imagine gold will eventually be revalued to reflect the decline in purchasing power of devalued currencies. It's also not too difficult to anticipate capital flows into whatever currency isn't being actively devalued--for example, the U.S. dollar.

One peculiar consequence of choosing not to devalue one's currency is the resulting inflows of capital fleeing devaluing currencies act as a form of quantitative easing: some of that capital flows into Treasury bonds, effectively replacing the Federal Reserve's QE bond purchases.

The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy. Predicting the timing and the winners--now that's tricky.



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.


And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.
You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.
It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Institute for the Advancement of Journalistic Clarity ($10), for your most generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

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