tag:blogger.com,1999:blog-338489552024-03-27T16:54:44.001-07:00oftwominds-Charles Hugh SmithCharles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comBlogger4145112tag:blogger.com,1999:blog-33848955.post-41903802385923318112024-03-25T10:41:00.000-07:002024-03-25T10:41:46.360-07:00Our Economy and Politics Are Broken<I>Awakening from the dream of painless financial / political solutions, we find the status quo is not the solution, it is the source of our decay. </I>
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<B>Our situation as a society is akin to awakening from a dream of loved ones to the realization that they passed away long ago.</B> Our economy and politics are broken, yet we continue dreaming that they are functional.
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<B>Let's start with politics.</B> American politics now bears an eerie resemblance to pre-collapse Soviet politics: a geriatric, sclerotic, stuck-in-the-past leadership, five-year plans (four year plans in the U.S. with one goal--get re-elected) that do nothing to change the trajectory of social decay, and a populace increasingly opting out of political engagement as people realize the pointlessness of the entire charade: the commoners are powerless and the elites are incompetent and disconnected from reality.
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<B>Recall <I>Smith's Neofeudalism Principle #1:</B>
If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the
financial Aristocracy at the ballot box, the nation is a democracy in name only.</I>
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<B>Take a look at the charts below and tell me how transferring power from one party to the other changed the trajectory of social decay</B>, kleptocracy, authoritarianism or the predations of the financial Aristocracy. You can't, as "business as usual" politics is incapable of changing the trajectory of inequality, debt and social decay.
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<B>The two-party "Business as usual" politics offers us a false choice, as neither party has the means to identify or address the fundamental sources of our decline as a society.</B> What we're offered is histrionic claims that one policy or another will fix the symptoms of decay rather than the sources of decay.
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<B>Historian Christopher Lasch (who died in 1994) saw that the either-or mindset of left-right, Progressive-Conservative was already a dead-end in 1990</B> when he wrote
<A HREF="https://amzn.to/3vqlaQC" target="resource">The True and Only Heaven</A>: <I>"We need to ask whether the left and right have not come to share so many of the underlying convictions, including a belief in the desirability and inevitability of technical and economic development, that the conflict between them, shrill and acrimonious as it is, no longer speaks to the central issues of American politics." (page 23)</I>
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<B>Look at the charts below and identify the great sea changes in trajectory caused by changing the party in power. There are none.</B> The Imperial Project continues apace regardless of what party claims power. This is the result of a broken political system that offers up a false choice while society careens toward a precipice.
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<B>Federal debt: where's the big reversal of trajectory caused by switching parties?</B>
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<img src="https://www.oftwominds.com/photos2024/fed-debt2-24.png" border="0" align="center"
class="wide">
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<B>Total public and private debt: where's the big reversal of trajectory caused by switching parties?</B>
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<img src="https://www.oftwominds.com/photos2024/TCMDO2-24.png" border="0" align="center"
class="wide">
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<B>Wealth of the top .01%: where's the big reversal of trajectory caused by switching parties?</B> The spot of bother in 2008-2009 that briefly interrupted the trend of rising concentration of wealth in the top few was the result of a catastrophically unstable, corrupt, exploitive financial system almost collapsing, not of political change.
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<img src="https://www.oftwominds.com/photos2024/wealth-top01A.png" border="0" align="center"
class="wide">
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<B>As for the economy, where do we begin?</B> With the dependence on skyrocketing debt to duct-tape the appearance of normalcy and the the all-important veneer of "optimism"?
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How about the rise to dominance of extreme speculation, as the only means left to get ahead in an economy ruled by monopolies, cartels and their regulatory partners?
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What about the decay of ethics to the lowest level: the normalizing of "pay-to-play" and "everyone has a price"?
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How about the reality that we're all held hostage to monopolistic technological / corporate platforms that relentlessly increase profits by crapifying goods and immiserating services?
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How about the reliance on the <I>monetization and commodification of addiction</I> as a reliable profit center?
As Lasch so presciently observed: <I>"The model of ownership, in a society built round mass consumption, is addiction."</I>
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<B>As for social decay, perhaps we can start with the reduction of all the bonds of an authentic social order to a series of "market transactions"</B>--the sale of attention and engagement, the purchase of distractions, the endless scrolling and clicking, the attendance at a protest that goes nowhere because it can't possibly lead to any real change--the scope and diversity of transactions generates the illusion of being connected as we drift into disconnected spheres of loneliness and anxiety as we sense, despite all the phony optimism and distraction, that our society is coming apart at the seams, and we're powerless to so anything but opt out of the madness.
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<B>Awakening from the dream of <I>painless financial / political solutions</I>, we find the status quo is not the solution, it is the source of our decay.</B> The status quo generates crises by its very nature and structure, and then claims that papering over the symptoms will magically resolve the sources of crisis and decay. But symptoms are not causes, and so this illusion has a very limited shelf-life.
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<img src="https://www.oftwominds.com/photos2017/overlapping-crises3-17.png" border="0" align="center"
class="wide">
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<I><B>New podcast:</B> <A HREF="https://youtu.be/_H5WwpEE7Cg" target="resource">Self Reliance & The Importance of Choice</A> (24 min), Part 2 in a three-part exploration of self-reliance.</I>
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<div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-49586117522280968072024-03-21T10:17:00.000-07:002024-03-21T10:17:19.896-07:00 What Happens When There's Nobody Left to Save Us?<I>Passively waiting for centralized powers to "save us" from their own excesses is not a solution. </I>
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<B>It's no exaggeration to say that our way of life depends on somebody somewhere saving us from the excesses that are the bedrock of our way of life.</B> What excesses, you ask? There are none. This is true in one sense: all the excesses have been normalized by previous "saves": whenever the bedrock excesses threaten to collapse under their own weight, the Federal Reserve or the Federal government rush in to save us from the excesses they've created.
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<B>Stripped of artifice, the bedrock excess that has been completely normalized is to goose consumption by borrowing from future earnings and resources.</B> As long as growth is eternal, this works great: we can always pay more interest on ever-expanding debt with future earnings because those will be inevitably be even larger than the interest due.
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<B>Creating money out of thin air is another mechanism that achieves the same goal:</B> goosing consumption via boosting the value of assets to generate a "wealth effect" that lifts all boats. This is also predicated on the eternal expansion of earnings, so wage earners can afford to consume as new money ceaselessly devalues the purchasing power of existing money (what we call inflation).
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<B>The problem is these "saves" only work if the interest rate is eternally near-zero and the costs of production are eternally declining:</B> as long as it costs almost nothing to borrow more money into existence and production costs continue to drop, enabling consumers to afford more goodies even as the purchasing power of their wages declines, then all is well.
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<B>But capital eventually demands yields above zero as risk rises</B> and risk rises along with debt and production costs, both of which depreciate the value of future earnings: as debt service costs rise, more earnings must be devoted to paying interest, reducing the sums available to spend on consumption. As production costs rise, the earnings left to spend buy less.
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<B>In other words, the "saves" increase risk, and eventually yields rise in response.</B> The debt dragon begins eating its own tail. Risk cannot be dissipated into the ether, it can only be hedged or offloaded onto some other entity. There are no hedges against systemic debt saturation, and the risks are being offloaded onto the entire system. When risk can no longer be suppressed with more "free money," the entire system collapses under its own weight.
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<B>The consequence of these dynamics is there won't be anyone left to "save us" with free money next time around.</B> As capital demands a return above zero and the devaluation of existing money pushes production costs higher, the system can no longer sustain its excesses.
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<B>So what happens when there's nobody left to save us?</B> The mind rejects this possibility. Surely the Fed or the federal government will find some way to flood the economy with whatever sums of "free money" are needed to keep borrowing from the future. But the excesses of money creation and debt are self-defeating: they become the Monster Id dissolving the system rather than the "save us" solution.
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<B>All ideologies have a fatal flaw: they limit potential solutions to a single limited tool box.</B> All ideologies are simple formulas at heart, and they all define the "problem" in a way that their proposed solution can remedy.
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<B>But the problems we've generated are interconnected in ways that can't be remedied with only one fix.</B> The global socio-economic system we've created is an <I>open system</I> that isn't entirely predictable--it is an ecosystem, not a clock. It generates feedback loops that funnel risk back into the system itself with every "save."
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<B>We need to be able to select solutions from a wide assortment of tools</B>, yet the mechanisms that have "saved us" in the past--central banks and governments--are wired to see the expansion of their own power as the only effective solution to any problem. This innate drive to expand their reach and power is the <I>ontological imperative</I> of centralized hierarchies, dynamics I untangle in my book <a href="https://www.amazon.com/gp/product/1468065084/ref=as_li_qf_sp_asin_tl?ie=UTF8&tag=charleshughsm-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=1468065084"
target="resource">Resistance, Revolution, Liberation</A>.
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<B>This expansion of centralized power inevitably limits our choices of solutions and freedom to choose for ourselves.</B> Call this whatever you wish, but this limiting of choice is a limiting of solutions, and the limiting of solutions is fatal to all open systems, regardless of size or apparent power.
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<B>The "saves" have loaded the entire system with excesses that cannot be resolved with even greater excesses.</B> Risk is rising, and the "saves" have only increased systemic risk. Those doing the "saving"--central banks and governments--are squeezing out whatever choices and solutions are not within their control, increasing our dependence on their "saves" of ever greater waves of "free money."
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<B>So what happens when there's nobody left to save us? We have to save ourselves, that's what.</B> It's called <a target="_blank" href="https://amzn.to/3RbjjUF">Self-Reliance</A>, which means preserving our freedom to choose options and solutions that work for us and our communities. Gordon Long and I discuss this in our recent video podcast
<A HREF="https://youtu.be/_H5WwpEE7Cg" target="resource">Self Reliance & The Importance of Choice</A> (24 min), the second segment in a three-part exploration of self-reliance.
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<B>Passively waiting for centralized powers to "save us" from their own excesses is not a solution</B>--it is magical thinking at its most dangerously delusional. Better to grab a tool box and start filling it with tools that you own and control.
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When You Can't Go On: Burnout, Reckoning and Renewal</A>
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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
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The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
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Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-54930473351208836372024-03-19T11:14:00.000-07:002024-03-19T11:14:48.540-07:00The Growing Rebellion Against Costly, Low-Quality, Overly-Complex Technology<I>Many consumers have yet to grasp how vulnerable they are to increasingly routine digital-component failures.</I>
<br>
<br>
<B>One of the greatest myths about "free markets" is that enterprises create products and services to meet the needs of consumers. That sounds nice but that's not what happens in monopoly-cartel dominated economies like ours.</B> In monopoly-cartel dominated economies like ours, what actually happens is the monopoly / cartel (i.e. a handful of quasi-monopolies that completely dominate their sector) limit their offerings to the most profitable products and services and force customers to buy them by making it impossible to find better-value options.
<br>
<br>
<B>Monopoly-cartel dominated economies like ours are rife with intentionally shoddy quality products and services because durability is anathema to ever-higher profits.</B> By designing products and services to fail--<I>planned obsolescence</I>--or become obsolescent by other means--<I>your product is no longer supported</I>--monopolies / cartels force consumers to constantly replace failed or timed-out products.
<br>
<br>
<B>The other mechanism favored by monopolies / cartels is <I>immiseration</I>: make the product or service so miserable to use that the disgusted consumer is forced to upgrade to minimize their suffering.</B> This is how monopolies / cartels manipulate the innocent-sounding "consumer choice:" you have a choice between suffering with low-quality products and services, or somewhat less suffering by paying more.
<br>
<br>
<B>If you want products and services that actually work and are durable, prepare to pay 10X more.</B> If you want kitchen appliances that function longer than a few years, no problem, just pony up $35,000. (A real-world number, believe me.)
<br>
<br>
<B>In other words, durability and quality service are now reserved for the top 5%.</B> Everyone else has the simulated choice between "unbearably low quality" or "bearably poor quality."
<br>
<br>
<B>Of course monopolies / cartels have excuses and justifications for their highly profitable designed-to-fail products and services.</B> One excuse is "garsh, everything is so complex now that some component somewhere fails, and we're helpless to stop it." In other words, complexity is the problem, not the absence of quality control.
<br>
<br>
<A HREF="https://www.wsj.com/personal-finance/the-lifespan-of-large-appliances-is-shrinking-e5fb205b" target="resource">The Lifespan of Large Appliances Is Shrinking</A> <I>Appliance technicians blame a push toward computerization and an increase in the quantity of components inside a machine.</I> (wsj.com)
<br>
<br>
<B>The apologists are half-right: complexity is a reliable source of failure.</B> That brings up the monopolies / cartels' second excuse: "we're just meeting customer demands for more conveniences."
<br>
<br>
<B>But the monopolies / cartels left out the other half of consumer demands: for durability, affordability and quality.</B> They also left out the fact that many consumers are actually demanding less complexity and less technology, demands that are ignored because reducing technological complexity and thereby increasing durability would be a disaster for the bottom line: simple, durable goods would crash profits.
<br>
<br>
<B>Beneath the highly profitable churn of "conveniences," consumers are fed up and demanding simple, durable products, not the overly complex designed-to-fail rubbish being sold by monopolies / cartels.</B> Consider the consumer statements in
<A HREF="https://www.yahoo.com/news/toaster-oven-does-not-smart-120014328.html" target="resource">
'My Toaster Oven Does Not Need To Be 'Smart'</A>, for example:
<br>
<br>
<I>"Tell me, why would anyone really want a smart fridge or toaster? I don't want the new, shiny thing. I want something that works and lasts a long time."
<br>
<br>
Or:
<br>
<br>
"Paying good money for a product that doesn't do the thing it says on the box until you install their BS app on your phone. This makes me want to start a fight."</I>
<br>
<br>
<B>Many consumers have yet to grasp how vulnerable they are to increasingly routine digital-component failures.</B> Today's vehicles are all one component failure away from being inaccessible (so sorry, you can't get into your car) and / or unstartable (please have your vehicle towed to an authorized dealership for an incredibly costly diagnostic of why your vehicle won't start.)
<br>
<br>
I've recounted in previous posts my own experience in replacing a clothes dryer digital controller ("motherboard") that cost roughly half as much as a new dryer, and required extraordinary efforts to install, such that the labor charge would have doubled the controller cost, effectively equaling the cost of a new dryer.
<br>
<br>
<B>Making repairs impossible or stupidly costly is all part of the immiseration by design, of course.</B> The $200 controller board--available only from the authorized supplier, of course--contained a few dollars of commodity chips and circuit boards encased in a convoluted plastic extrusion worth a few more dollars. If a 10X markup annoys you, too bad, there are no other sources for the controller, which is of course not a commodity: it only functions in a specific brand and model.
<br>
<br>
<B>The rebellion against needlessly costly, complex, designed-to-fail products and services is brewing.</B> In a truly open "free market" stripped of monopolies and cartels, products and services that were simple, durable and largely (or completely) analog would enter the market to serve the growing number of consumers who've had enough of overly complex, overly costly, designed-to-fail products. But that isn't going to happen in economies dominated by monopolies / cartels such as ours.
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<div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-24240251607667084222024-03-15T15:49:00.000-07:002024-03-15T15:49:18.305-07:00Why Social Trust Is Cratering: The Difference Between Elites and Commoners<I>We trust what we own / control, and the difference between elites and commoners is the elites own / control the wealth and power that dominate our daily lives.</I>
<br>
<br>
<B>It sounds too obvious to be profound: we trust what we own / control. Of course we do.</B> But it becomes profoundly consequential when we add the shadow half of the statement: <B>we don't trust what we don't own / control without constant feedback providing verifiable evidence that it is worthy of our trust.</B>
<br>
<br>
Absent this positive verifiable (i.e. factual evidence based on both data and personal-anecdotal experience) feedback, <B>we have good reason to assume whatever we don't own / control is primarily serving the interests of those who do own / control it.</B> And since this means the product/service's trustworthiness is suspect despite claims that it serves our interests, we must seek a steady flow of feedback substantiating that the product/service is still providing the value the owners / managers are claiming, either explicitly or implicitly.
<br>
<br>
<B>In other words, hands-on knowledge about the inner workings of the product/service generates trust.</B> Absent this experiential knowledge, we're flying blind as to the true value of the product/service. If the actual value is less than the owners / managers claim, both the owners / managers and the product/service they're providing are unworthy of our trust.
<br>
<br>
<B>Consider a simple example: the food we put in our mouths to sustain ourselves.</B>
<br>
<br>
When I collect fruits and vegetables I've grown here in our yard, I have direct knowledge of what went into the care and nurturing of the plants/trees/soil, so I know that there are no pesticides or herbicides and there are an abundance of micronutrients in our food due to the careful management of compost and fertilizers.
<br>
<br>
The food we eat from our homestead is therefore trustworthy.
<br>
<br>
We get lettuce and beets from a longtime family friend who has been farming for decades. He takes great pride in his produce and works extremely hard to raise te highest quality produce. Though I don't have direct knowledge of his day-to-day practices, I know and trust him and I can see the vibrancy of his produce and taste its quality.
<br>
<br>
These are the people in our trusted personal network.
<br>
<br>
<B>You see the gradient of trust:</B> first level is first-hand experience/knowledge, second level is trusted personal network.
<br>
<br>
<B>Compare this to produce labeled "organic" in a supermarket.</B> We are making a great many assumptions about the produce this label is attached to. We assume the agency monitoring the actual farm practices is thorough and accurate, but this is quite stretch in the real world. Are inspectors onsite every day? What exactly do they test? Where are the results posted?
<br>
<br>
<B>Produce, organic or not, is a commodity, and nobody is testing the nutritive content of the produce.</B> Maybe one field hasn't been depleted of micronutrients, while the rest have been over-farmed and depleted of the micronutrients we need to be healthy.
<br>
<br>
Since all produce is a commodity in global markets, they're all interchangeable: one kilo of organic tomatoes or wheat is interchangeable with any other kilo of organic tomatoes or wheat, so there's no way to tell if the "organic" produce or meat has high or low nutritive value. All that's being claimed is that no pesticides or herbicides were applied and whatever compost and fertilizer were applied were organic. <B>That's entirely different than claiming the produce/meat is high in nutritive value.</B>
<br>
<br>
Plants have immune systems, too, and a healthy plant provided with sufficient nutrients and water will resist insect infestations, fungi, bacteria, etc. far better than plants raised in depleted soils. Anyone with experience in actually growing fruits and vegetables is keenly alive to signs of nutrient deficiency or infestation.
<br>
<br>
<B>The point is "organic" doesn't mean the produce or meat is packed with nutrients.</B> It just means the minimal guidelines qualifying the product as organic (or "bio") were met. Those guidelines don't guarantee a product packed with micronutrients. That takes extra care and tracking that isn't done in a commoditized economy.
<br>
<br>
<B>Consider efficacy claims and side-effect labeling on pharmaceuticals.</B> If you actually study the Phase III trial data (I have), you find that the medications were not actually tested in conjunction with other commonly consumed medications. The potential interactions are completely unknown. You also discover the statistical legerdemain that goes into claiming efficacy that may be just barely above random results.
<br>
<br>
Since we have very little knowledge or control of all the medications deemed "safe" by untrustworthy agencies, all these medications are intrinsically untrustworthy until proven otherwise by multiple independent sources over a decade.
<br>
<br>
<A HREF="https://www.scientificamerican.com/article/how-two-pharmacists-figured-out-that-decongestants-dont-work/" target="resource">How Two Pharmacists Figured Out That Decongestants Don't Work</A>:
<I>A loophole in FDA processes means older drugs such as those in oral decongestants weren't properly tested. Here's how we learned the most popular one doesn't work.</I>
<br>
<br>
<B>Now consider social media sites such as Facebook or X/Twitter.</B> You may have noticed that what appears in your feed/scroll changes. These changes are not within our control or transparent; we presume the algos are being tweaked to maximize the income being generated by our content and our attention.
<br>
<br>
When Big Tech notifies you that your content "violated our community standards," the violation is not specified, and if you ask, you won't get a reply or explanation. We have no idea who is seeing what we post, or what's being done with our attention-data. We have no knowledge or control of these algos and processes, and so they are intrinsically untrustworthy.
<br>
<br>
<B>If we examine all the agencies, institutions, monopolies and cartels that control the vast majority of our lives, we find that we have near-zero knowledge or control of any of their inputs, processes or outputs</B>, and so all of these agencies, institutions, monopolies and cartels are intrinsically untrustworthy until they consistently prove themselves trustworthy in some verifiable fashion.
<br>
<br>
<B>Few of these agencies, institutions, monopolies and cartels provide this feedback.
<br>
<br>
Consider the labels on processed foods for humans.</B> Anyone caring for animals knows the labeling on food for animals is far stricter and more detailed than food for humans, for a good reason: those profiting from selling processed "food" to humans might have a harder time selling their low-quality products if we knew more about the low quality ingredients, high sugar and salt content, etc.
<br>
<br>
<B>This is why commoners have lost trust in the nation's agencies, institutions, monopolies and cartels, while the top 1% elites that own and control these entities still trust them:</B> they trust them because they serve their interests.
<br>
<br>
<B>The commoners intuitively sense these entities do not serve their interests, they only claim to do so to maximize profits / "shareholder value"</B> or to divert attention from the poor quality service/products. We know the claims being made are false because we experience the absence of transparency and accountability first-hand, and the abysmally low quality of the products and services first-hand.
<br>
<br>
<B>The only viable solution is to own/control as much as you can, and nurture our own trusted personal networks.</B> The only way to escape being stripmined and shorn by the entities owned and controlled by the top 1% elites is to abandon those agencies, institutions, monopolies and cartels as much as possible. That is the essence of what I call self-reliance.
<br>
<br>
<B>We are blind to the decay of the hierarchy of trust because we've been trained to trust sprawling, unaccountable agencies and corporations</B> without actually having any evidence that they are trustworthy.
<br>
<br>
<B>At the top is owning / controlling the products/services ourselves.</B> We trust our produce because we grew it. We trust our home repair because we did the work. Very few of us own or control anything other than our house or financial abstractions controlled by others.
<br>
<br>
<B>The second level is personal trusted networks.</B> Very few of us have personal trusted networks that provide the essentials of life. Virtually everything essential to modern life is commoditized and globalized; it comes from far away and we know nothing about its origin, quality or value.
<br>
<br>
<B>The third level is local enterprises and agencies that are local enough to generate feedback we can access simply by listening to our neighbors and peers.</B> On a very practical level, most communities once had local dairies and bakeries and broader networks of local businesses that provided services that are no longer available: shoe repair, etc.
<br>
<br>
<B>The fourth and lowest level is commoditized feedback</B> from a variety of sources that can be compared for completeness and accuracy, feedback that enables us to assess the relative trustworthiness of commoditized products and services sold by private monopolies and cartels theoretically monitored by unaccountable sprawling state agencies.
<br>
<br>
Our essential public services are also provided by other unaccountable sprawling state agencies that can fail in every way but are not influenced by their failure because we have no alternative to the DMV, tax office, etc.
<br>
<br>
<B>These public-private monopolies and cartels provide very little feedback, and what little is available is itself suspect due to self-interest.</B>
<br>
<br>
<B>We control and own so little of what we need to live and what impacts our lives</B>, and very few of these essentials are produced locally. We receive very little if any trustworthy feedback about the mega-entities (universities, hospital chains, Big Ag, Big Pharma, government agencies, Big Tech, Big Finance, Big Retail, etc.) that dominate our economy and our lives or the quality / value of the products and services they provide.
<br>
<br>
<B>Professional elites still trust these mega-entities because they serve the interests of the elites who own / control them.</B> The commoners no longer trust these entities because there is no reason or evidence to generate trust while there is a wealth of evidence supporting distrust.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/trust3-24a.png" border="0" align="center"
class="wide">
<br>
<br>
<B>We trust what we own / control, and the difference between elites and commoners is the elites own / control the wealth and power that dominate our daily lives.</B>
<br>
<br>
<B>As I noted in <A HREF="https://www.oftwominds.com/blogmar24/low-trust3-24.html" target="resource">
A Low-Trust Society Is an Impoverished Society</A>, our only positive option is to regain as much ownership and control of our lives as we can manage</B>, and nurture trusted personal networks and local enterprises and organizations. As I put it a few years ago: <I>Tune in (to self-reliance), drop out (of hyper-consumerism and debt-serfdom) and turn on (to relocalizing capital and agency).</I>
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<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
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Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
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<A HREF="https://www.oftwominds.com/Global-Crisis-National-Renewal-sample.pdf" target="resource">
Read Chapter One for free (PDF)</A>.
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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
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(Kindle $5, print $10, audiobook)</A>
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The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
$4.95 Kindle, $10.95 print);
<A HREF="https://www.oftwominds.com/TCP-sample2.pdf" target="resource">read the first chapters
for free (PDF)</A></I>
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Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-27133700623049286542024-03-14T16:27:00.000-07:002024-03-14T16:27:35.131-07:00America the Snackable<I>There is only one pathway to health and sanity: stop consuming snackables of any kind. </I>
<br>
<br>
<B>Everything in America has become snackable:</B> devoid of value, easily consumed, intentionally addictive, and ultimately destructive to all that is healthy for individuals, communities and society at large.
<br>
<br>
<B>The core features of edible snackables are self-evident yet worthy of a closer look</B> due to the severity of the consequences:
<br>
<br>
1. The snack is made of highly processed ingredients.
<br>
<br>
2. The snack has high concentrations of sugar, salt and unhealthy oils/fats.
<br>
<br>
3. The snack has low nutritional value (empty calories) and is not beneficial to health.
<br>
<br>
4. The snack is packaged in small quantities so the price appears cheap but is revealed as expensive when converted to price per pound.
<br>
<br>
5. The snack's "serving size" may be deceptively presented: a 4-ounce package may have a calorie count based on a "serving size" of 2 ounces, as if the package contains two servings when everyone knows a single individual will consume the entire snack.
<br>
<br>
<B>6. The snack is a legal addictive product</B> as the snack has been designed to hijack humans' innate receptors for sugar, salt and fat and satisfying mouthfeel. (<I>Bet ya can't have just one.</I>)
<br>
<br>
<B>Highly processed, highly addictive, low nutritional value foods are a key driver of America's declining health.</B> All these foods share the same characteristics of the manufactured snackables: they are heavily marketed, highly profitable and contribute to obesity and metabolic disorders.
<br>
<br>
<B>When only one-quarter of the adult populace is normal weight, this leads to a host of chronic health disorders</B> including higher risks of heart disease and many cancers, as well as the spectrum of metabolic
disorders such as diabetes and prediabetes. Here are the facts: over 73% of adult Americans are overweight or obese.
<br>
<br>
<img src="https://www.oftwominds.com/photos2023/overweight-obese10-23a.png" border="0" align="center"
class="wide">
<br>
<br>
<B>Given that almost 3/4 of adult Americans are overweight or obese, it shouldn't surprise us that 52% of adult Americans are diabetic or prediabetic.</B> This is a sobering trend, one that won't be reversed by $1,000 a month weight-loss medications which cease to be effective once they're no longer consumed. These medications don't change the patients' diets from highly processed foods to only unprocessed real food, and so the benefits are inherently narrower than advertised.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/diabetes2.png" border="0" align="center"
class="wide">
<br>
<br>
<B>The snack and beverage aisles take up an astounding amount of space in America's specialty-groceries and supermarkets.</B> These are the profit-generators, and so the processed-food manufacturers and grocery retailers are constantly seeking to entice more addicts with new novelties. For example: <A HREF="https://www.yahoo.com/lifestyle/40-trader-joes-products-youre-011903489.html" target="resource">
Trader Joe's Has Been Releasing A Ton Of New Products Lately</A>.
<br>
<br>
Consuming this kind of high-fat, empty-calorie snack isn't going to generate a healthy lifestyle.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/TJ1a.png" border="0" align="center"
class="wide">
<br>
<br>
The marketing of novelty is as refined and devoid of value as the snacks being manufactured and sold:
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/TJ3a.png" border="0" align="center"
class="wide">
<br>
<br>
As those with any knowledge and experience of fitness know, the notion that it's possible to burn off the empty calories of snacks with a bit more exercise is a fantasy--hence America's bulging waistlines and declining health.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/TJ4a.png" border="0" align="center"
class="wide">
<br>
<br>
<B>The enormous profitability of edible snacks is mirrored in all the other manifestations of America the Snackable:</B> our daily lives are now composed of one bite-sized addictive snack of social media, novelty memes, political opinion, financial data-snacks and pundits' opinions and snackable videos after another.
<br>
<br>
Attention spans and the ability to grasp complex issues have withered to snack-size, and whatever is being marketed as "ideas" are as devoid of value as an empty-calorie snack.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/TJ2b.png" border="0" align="center"
class="wide">
<br>
<br>
<B>All share the same characteristics: they are addictive, bite-sized, packaged deceptively, marketed as novelty, devoid of value, destructive to human health and most importantly, astoundingly profitable.</B> So the edible snacks generate chronic illnesses which then provide fodder for highly profitable medications, while the inherently deranging snackables of social media, videos, entertainment, political opinions and memes-du-jour fuel mental disorders which provide fodder for a vast spectrum of highly profitable medications.
<br>
<br>
<B>There is only one pathway to health and sanity: stop consuming snackables of any kind.</B> Yes, the only solution is cold turkey, baby, and like all addictions, it's painful at first, and then it becomes a great relief to be freed of the addictions.
<br>
<br>
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Self-Reliance in the 21st Century</a> print $18,
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<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
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<a target="_blank" href="https://amzn.to/3yvZDFo">
When You Can't Go On: Burnout, Reckoning and Renewal</A>
$18 print, $8.95 <a target="_blank" href="https://amzn.to/3FNLpRJ">Kindle ebook</A>;
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Read the first section for free (PDF)</A>
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<a target="_blank" href="https://amzn.to/3lc4eVc">
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
(Kindle $9.95, print $24, <a target="_blank" href="https://www.amazon.com/dp/B09VCNSSDB/">audiobook</A>)
<A HREF="https://www.oftwominds.com/Global-Crisis-National-Renewal-sample.pdf" target="resource">
Read Chapter One for free (PDF)</A>.
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<a target="_blank" href="https://www.amazon.com/gp/product/B08HJWR4VC/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08HJWR4VC&linkCode=as2&tag=charleshughsm-20&linkId=000dd63f47205f26b52a959cb4769242">
A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
(Kindle $8.95, print $20,
<a target="_blank" href="https://www.amazon.com/gp/product/B08PQ4FYPV/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08PQ4FYPV&linkCode=as2&tag=charleshughsm-20&linkId=39f4ad82c7b1a6c6a6044daa3b6790bd">
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<A HREF="https://www.oftwominds.com/AHT-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>.
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<a target="_blank" href="https://www.amazon.com/gp/product/B082VLQBQ3/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B082VLQBQ3&linkCode=as2&tag=charleshughsm-20&linkId=87deea89ddfe8dbf52738aebbf7f7ef4">
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
<br>
(Kindle $5, print $10, audiobook)</A>
<A HREF="https://www.oftwominds.com/Richer-Poorer-sample.pdf" target="resource">
Read the first section for free (PDF)</A>.
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<I><a target="_blank" href="https://www.amazon.com/gp/product/B07G7R9Y9B/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B07G7R9Y9B&linkCode=as2&tag=charleshughsm-20&linkId=f2eedd137f2f10768d49846b931e6f21">
The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
$4.95 Kindle, $10.95 print);
<A HREF="https://www.oftwominds.com/TCP-sample2.pdf" target="resource">read the first chapters
for free (PDF)</A></I>
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<a target="_blank" href="https://www.amazon.com/gp/product/B077S8PJ5Y/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B077S8PJ5Y&linkCode=as2&tag=charleshughsm-20&linkId=d3a935e067cb9a216e52fce67fa627b6">
Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
<A HREF="https://www.oftwominds.com/Money-Work-free.pdf" target="resource">
Read the first section for free</A></B>
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<div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-69887135098380945292024-03-07T15:01:00.000-08:002024-03-07T15:01:32.593-08:00A Low-Trust Society Is an Impoverished Society<I>The sole remaining reservoirs of trust in American life are personal networks, local enterprises and local institutions. </I>
<br>
<br>
<B>It's not exactly news that social trust has declined significantly in the United States.</B> Surveys find that public trust in institutions and the professional classes that dominate those institutions has cratered. (see chart below) Social trust--our confidence that other people are trustworthy--has also fallen to multi-decade lows.
<br>
<br>
<B>This was not the case in decades past.</B> Americans maintained high levels of trust in their institutions, government and fellow citizens. The decline in social trust is across the entire spectrum: our trust in institutions, professional elites and our fellow Americans has declined precipitously.
<br>
<br>
<B>The causes of this decay of social trust can be debated endlessly, but several factors are obvious:</B>
<br>
<br>
<B>1. Institutions forfeited the trust of the citizenry by withholding / editing realities to serve the interests of hidden agendas and insiders' careers.</B> The Vietnam War was pursued on fabrications, as was the second Gulf War to topple Saddam. Watergate eroded trust on multiple levels, as did the Church Committee's investigation of America's security agencies' domestic spying / over-reach.
<br>
<br>
<B>2. The managerial / professional elites at the top of the nation's institutions no longer put the citizenry's interests above their own.</B> The public's trust has eroded as institutions are primarily viewed as vehicles for self-enrichment and career advancement: healthcare CEOs pay themselves millions, higher education is bloated with layers of non-teaching administration, defense contractors and the Pentagon have greased the revolving door to the benefit of incumbents and insiders, and so on, in an endless parade of self-serving cloaked with smirking PR claims of "serving the public."
<br>
<br>
<B>The shift from a high-trust society to a low-trust society is consequential economically, politically and socially.</B> Low-trust societies have stagnant economies, as nobody trusts anyone they don't know personally or through personally trusted networks, and nobody trust institutions to function effectively or fulfill their stated mission to serve the public good.
<br>
<br>
<B>Faced with incompetent, unaccountable, corrupt bureaucracies and a culture overflowing with scams, frauds, imposters and get-rich-quick schemes, people give up and drop out.</B> Rather than start a business and accept all the risks just to get dumped on or ripped off, they don't even try to start a business. Given the financial insecurity that is now the norm, they decide not to get married or have children.
<br>
<br>
<B>The vast trading networks of the Roman Empire were based on personal trusted networks and trust in Rome's functionaries / institutions.</B> The owners of trading ships dealt with trusted captains and merchants, who then paid duties to Roman functionaries in Alexandria and other major trading ports.
<br>
<br>
In other words, <I>tightly bound</I> personal trusted networks work well as long as the state institutions that bind the entire economy are trusted as fair and reliable--not perfect, of course, but efficient and "good enough."
<br>
<br>
<B>But when public institutions are viewed as unfair, unreliable, corrupt or incompetent, the entire economy decays.</B> Even personal trusted networks cannot survive in an economy of unfair, unreliable, corrupt or incompetent state bureaucracies and private institutions.
<br>
<br>
<B>The American economy is now dominated by enormous privately owned and managed monopolies and cartels that are the private-sector equivalent of self-serving state bureaucracies.</B> Big Tech, Big Pharma, Big Healthcare, Big Ag, Big Finance, etc., are even worse than state bureaucracies because there are no legal requirements for transparency or recourse. Try getting a response from a Big Tech corporation when you've been shadow-banned or sent to Digital Siberia.
<br>
<br>
<B>The sole remaining reservoirs of trust in American life are personal networks, local enterprises and local institutions.</B> These are not guaranteed, of course; in many locales, even these reservoirs have been drained. But in other locales, enterprises and institutions such as the county water utility, the local newspaper, the local community college, etc. continue to earn the trust of the public by performing the services they exist to provide effectively and at a reasonable cost.
<br>
<br>
<B>The larger the institution and the greater its wealth and power, the lower the social trust--for good reasons.</B> The greater the influence of the managerial elites, the greater the disconnect from the everyday experiences of the citizenry and customers, and the more extreme the self-serving PR.
<br>
<br>
<B>Sure, I trust Big Tech, Big Pharma, Big Healthcare, Big Finance--to rip me off</B>, profiteer, send me obfuscating bills, jack up junk fees, make it impossible to contact them, and send me to Digital Siberia if I complain.
<br>
<br>
The divide between the elites and the commoners should prompt us to examine the low-trust path we're sliding down:
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/trust3-24a.png" border="0" align="center"
class="wide">
<br>
<br>
<B>In a society in which everything is phony, low quality or fraudulent, you're taking a chance trusting anyone you don't know personally</B>--and even that can be risky now that self-aggrandizing flim-flam is the last remaining path to financial security for non-elites.
<br>
<br>
<img src="https://www.oftwominds.com/photos2023/social-trust2.png" border="0" align="center"
class="wide">
<br>
<br>
<B>A low-trust society is an impoverished society, economically stagnant and socially threadbare.</B> That's where we are now, and the more fragmented, greedy, self-serving, desperate and deranged we become, the lower the odds that we'll find the means to rebuild trust.
<br>
<br>
Sadly, we already know that anyone claiming to "rebuild trust" is spouting PR designed to mask self-enrichment. We also know that the vast army of well-paid flacks, factotums, enforcers, happy-story apologists, lackeys, toadies and sell-out minions are declaring "everything's great!"
<br>
<br>
Just mumble, "Uh, sure" and continue to <I>Tune in (to degrowth), drop out (of hyper-consumerism and debt-serfdom) and turn on (to self-reliance and relocalizing capital and agency).</I>
<br>
<br>
<br>
<HR width="500" color="darkblue">
<br>
<br>
<I><B>My recent books:</B></I>
<br>
<br>
<I>Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.</I>
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<br>
<I>
<a target="_blank" href="https://amzn.to/3RbjjUF">
Self-Reliance in the 21st Century</a> print $18,
(<a target="_blank" href="https://amzn.to/3C7BExM">Kindle</A> $8.95,
<A HREF="https://amzn.to/3vs7bpX:" target="resource">audiobook</A> $13.08 (96 pages, 2022)
<A HREF="https://www.oftwominds.com/Self-Reliance-sample2.pdf" target="resource">
<I>Read the first chapter for free (PDF)</I></B></A>
<br>
<br>
<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
(Novel) <a target="_blank" href="https://amzn.to/3CTFfP1">print</A> $10.95,
<a target="_blank" href="https://amzn.to/3MQsaum">Kindle</A> $6.95
<A HREF="https://www.oftwominds.com/AHWSM-excerpt2.pdf" target="resource">
<I>Read an excerpt for free</I></A> (PDF)
<br>
<br>
<a target="_blank" href="https://amzn.to/3yvZDFo">
When You Can't Go On: Burnout, Reckoning and Renewal</A>
$18 print, $8.95 <a target="_blank" href="https://amzn.to/3FNLpRJ">Kindle ebook</A>;
<a target="_blank" href="https://https://amzn.to/3AVo3ZZ">audiobook</A>
<A HREF="https://www.oftwominds.com/Burnout-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>
<br>
<br>
<a target="_blank" href="https://amzn.to/3lc4eVc">
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
(Kindle $9.95, print $24, <a target="_blank" href="https://www.amazon.com/dp/B09VCNSSDB/">audiobook</A>)
<A HREF="https://www.oftwominds.com/Global-Crisis-National-Renewal-sample.pdf" target="resource">
Read Chapter One for free (PDF)</A>.
<br>
<br>
<a target="_blank" href="https://www.amazon.com/gp/product/B08HJWR4VC/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08HJWR4VC&linkCode=as2&tag=charleshughsm-20&linkId=000dd63f47205f26b52a959cb4769242">
A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
(Kindle $8.95, print $20,
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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
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(Kindle $5, print $10, audiobook)</A>
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<I><a target="_blank" href="https://www.amazon.com/gp/product/B07G7R9Y9B/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B07G7R9Y9B&linkCode=as2&tag=charleshughsm-20&linkId=f2eedd137f2f10768d49846b931e6f21">
The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
$4.95 Kindle, $10.95 print);
<A HREF="https://www.oftwominds.com/TCP-sample2.pdf" target="resource">read the first chapters
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<a target="_blank" href="https://www.amazon.com/gp/product/B077S8PJ5Y/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B077S8PJ5Y&linkCode=as2&tag=charleshughsm-20&linkId=d3a935e067cb9a216e52fce67fa627b6">
Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-27174402669621763082024-03-06T10:09:00.000-08:002024-03-06T10:09:34.809-08:00Global Recession's Winners and Losers<I>The few winners of global recession will use the decline as a means to break the chokehold of unproductive BAU elites. </I>
<br>
<br>
<B>That the global economy is slipping into recession is self-evident.</B> What's not yet known is the eventual depth and length of the recession. Given that the extreme policies needed to avoid recession over the past 15 years have reached extremes that are now the <I>problem, not the solution</I>, there won't be any more fiscal-monetary "saves" this time around.
<br>
<br>
<B>What's also not yet known is how far the few winners will advance and how far the losers will fall.</B> Recall that when it comes to wealth and power, what matters is not absolute gains or losses, but <I>relative gains or losses</I>: how well we do in relation to our peers and competitors.
<br>
<br>
For example, among 10 households with $1 million in assets, if one household experiences a decline in net worth to $900,000, that's an absolute drop of $100,000--not exactly welcome. But if the other 9 households experienced losses of between $500,000 and $900,000, leaving their net worth between $100,000 and $500,000, the household that lost only $100,000 gained tremendous ground in relation to the rest of their peers.
<br>
<br>
<B>This will also play out on the grand stage of nation-states and alliances:</B> those nations / alliances that weather a deep, lengthy global recession with modest losses will be much stronger post-recession that those who suffered losses that cannot be replaced that then tipped the nation into destabilization and eventual collapse.
<br>
<br>
<B>I have long held that in this sense, recession can be weaponized by those with superior core assets</B> in resources, flexibility and adaptability: <A HREF="https://www.oftwominds.com/depression-weapon2-23a.html" target="resource">Weaponizing Global Depression</A> (2/23/23).
<br>
<br>
<B>Every nation can print money, but the trick is to be able to do so without unleashing currency debasement / hyper-inflation.</B> There are only a few levers that can be pulled to get away with printing money out of thin air to support one's economy in recession, and none are easy to sustain:
<br>
<br>
<B>1. Print the money by issuing bonds that pay higher yields than competing bonds.</B> Capital flows where it's treated best, and higher yields are attractive--but only if the following two conditions are met:
<br>
<br>
<B>2. The bonds and the currency are highly liquid and can be traded in size</B> so major players can enter and exit at will. Illiquid securities are inherently risky, as when the time comes to sell and the exit door shrinks down to the size of a dormouse, hefty gains reverse immediately to catastrophic losses.
<br>
<br>
<B>3. The collateral for the newly issued bonds--the underlying economy and governance structures--are transparent and trustworthy.</B> The collateral for newly issued bonds and currency is the nation's economy and governance structures: the greater the diversity of economic resources and activity, the more transparent the markets, data and regulatory structures, the greater the trustworthiness of the collateral and thus the lower the risk profile and premium.
<br>
<br>
This is why nations with poor transparency, narrow economic bases and regulations that change without warning with regime zig-zags have to pay extraordinarily high bond yields to attract capital: the risks of default, regulatory reversals or illiquidity are intrinsically high.
<br>
<br>
<B>You see the problem: it's impossible to broaden one's economic base and establish trust overnight.</B> It takes years or even decades to establish liquid, trustworthy markets that remain trustworthy even as political winds shift.
<br>
<br>
<B>Those nations that have broad economic bases and trustworthy financial systems are few, and their choice is simple:</B> either squander this collateral by using the newly issued money to prop up unproductive, rentier BAU (business as usual) elites, monopolies and cartels, or use the recession to divert resources and money away from dead-weight BAU and invest it productively.
<br>
<br>
<B>Those nations that create money to prop up rentier BAU will slide into potentially terminal stagflation</B> as creating new money and giving it to unproductive monopolies, cartels and elites increases the supply of money available to "invest" in asset bubbles--unproductive elites outbidding each other for the pool of productive assets--without increasing the productivity of the economy. This deflates the value of the currency (what we call inflation) even as it guarantees systemic malinvestment that keeps growth of productivity stagnant.
<br>
<br>
<B>The trick is to use the newly created money wisely, which requires limiting the greed and power of BAU elites</B>--something few nations (if any) can manage, as the BAU elites put their own interests above the interests of the nation and its citizenry.
<br>
<br>
<B>Those nations that are largely self-sufficient in energy, food and technology will obviously weather recession better than those that depend on other nations for the essentials of life.</B> Those nations that depend on selling resources such as oil and minerals for their national income are also extremely vulnerable, as recessions depress demand which then leads to lower commodity prices. Those selling the resources can attempt to restrict supply to keep prices high, but a deep global recession will suppress demand to the point that restricting supply may not be enough to keep prices high enough to maintain Business As Usual.
<br>
<br>
<B>Since the easy-to-extract resources have already been exploited, what's left is more expensive to extract.</B> The costs of extraction remain stubbornly high while revenues plummet, leading to a severe compression of net income. Those nations that depend almost entirely on selling resources will face a collapse of net income that will test their status quo to the breaking point.
<br>
<br>
<B>The story of civilization is BAU elites will do everything in their power to maintain the status quo as it is</B> because this configuration is the source of their wealth and power. Given the power of their self-interest, this configuration is brittle and thus prone to cracking in unpredictable ways.
<br>
<br>
To survive challenges like deep, lengthy recessions, nations must have the structural flexibility to enable competing elites to replace the BAU elites whose exploitive, unproductive grip has fatally weakened the nation's social, political and economic orders.
<br>
<br>
<B>Just printing money to prop up a brittle, exploitive, unproductive BAU elite of bureaucracies, monopolies and cartels will not reverse the recession</B>, for just squandering new money can't fix what's broken. Rather, creating more money to maintain the corrupt, extractive BAU can only increase the brittleness and the risks that stagnation and rising debts will lead to unanticipated stresses that break the status quo.
<br>
<br>
<B>The few winners of global recession will use the decline as a means to break the chokehold of unproductive BAU elites</B> and divert resources to more productive uses. The losers will squander their diminishing resources on propping up the source of their national decay: self-serving BAU elites.
<br>
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<B><I>New podcast</I></B> <A HREF="https://www.youtube.com/watch?v=GiZjH5vav30" target="resource">
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When You Can't Go On: Burnout, Reckoning and Renewal</A>
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Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
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Read Chapter One for free (PDF)</A>.
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<a target="_blank" href="https://www.amazon.com/gp/product/B08HJWR4VC/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08HJWR4VC&linkCode=as2&tag=charleshughsm-20&linkId=000dd63f47205f26b52a959cb4769242">
A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
(Kindle $8.95, print $20,
<a target="_blank" href="https://www.amazon.com/gp/product/B08PQ4FYPV/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08PQ4FYPV&linkCode=as2&tag=charleshughsm-20&linkId=39f4ad82c7b1a6c6a6044daa3b6790bd">
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<A HREF="https://www.oftwominds.com/AHT-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>.
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<a target="_blank" href="https://www.amazon.com/gp/product/B082VLQBQ3/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B082VLQBQ3&linkCode=as2&tag=charleshughsm-20&linkId=87deea89ddfe8dbf52738aebbf7f7ef4">
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
<br>
(Kindle $5, print $10, audiobook)</A>
<A HREF="https://www.oftwominds.com/Richer-Poorer-sample.pdf" target="resource">
Read the first section for free (PDF)</A>.
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<I><a target="_blank" href="https://www.amazon.com/gp/product/B07G7R9Y9B/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B07G7R9Y9B&linkCode=as2&tag=charleshughsm-20&linkId=f2eedd137f2f10768d49846b931e6f21">
The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
$4.95 Kindle, $10.95 print);
<A HREF="https://www.oftwominds.com/TCP-sample2.pdf" target="resource">read the first chapters
for free (PDF)</A></I>
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<a target="_blank" href="https://www.amazon.com/gp/product/B077S8PJ5Y/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B077S8PJ5Y&linkCode=as2&tag=charleshughsm-20&linkId=d3a935e067cb9a216e52fce67fa627b6">
Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
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Read the first section for free</A></B>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-15861912496304935132024-03-04T08:57:00.000-08:002024-03-04T09:06:55.993-08:00These Four Themes Will Define the Next Decade<I>Everyone at the trough believes that the transition from liquid water (free flowing credit) to ice cannot possibly happen. So when it happens, everyone will be surprised. </I>
<br>
<br>
<B>Morgan Stanley recently came out with their <A HREF="https://www.zerohedge.com/markets/morgan-stanley-these-3-themes-will-have-profound-impacts-markets-many-years" target="resource">3 Themes that will impact markets for many years</A></B>: <I>longevity, AI tech diffusion, and decarbonization</I>, i.e. the transition from hydrocarbon fuels to so-called "green energy."
<br>
<br>
<B>That's the status quo: everything's great!</B> Pills that cost $1,000 a month will make us live longer, AI will increase corporate profits (which is the entire point of the economy, of course) and those who invest in the "green energy" transition will be rewarded with fabulous wealth.
<br>
<br>
<B>That all sounds peachy, but the real world will be defined by four much different themes:</B> <I>sclerosis, dysfunction, debt saturation and power asymmetry</I>.</B>
<br>
<br>
<B>Sclerosis: the same old nodes of power cling onto power</B> and so nothing changes because nothing can change: those in power must maintain or expand their power, regardless of what comes along, and that sclerosis is the systemic problem that cannot be resolved.
<br>
<br>
<B>2. Dysfunction: nothing works due to the consequences of sclerosis:</B> those who cling to power do so by eliminating every dynamic of open, self-correcting systems: they get rid of competition (every sector is dominated by monopolies, cartels or state-cartels), they get rid of transparency (<I>information asymmetry</I> is how they maintain power) and they have a lock on regulatory complexity / capture: first jump through all these hoops and maybe we'll let you propose some worthless policy tweak that leaves our power intact. Or we'll co-opt you by inviting you to become one of our flunkies, PR flacks, factotums, enforcers, lackeys, etc.
<br>
<br>
In a system rigged to maximize the profit and power of the few at the expense of the many, nothing works because the system is no longer capable of self-correction.
<br>
<br>
<B>3. Debt saturation: 15 years of expanding credit has created the illusion we can pay for everything, no matter how costly, from future earnings, basically forever.</B> So we need trillions to transition to "green energy," no problem, we'll borrow it. We need more trillions to pay for an aging, increasingly sickly populace, no problem, we'll borrow it. We need to borrow more trillions to fund all the status quo grift and graft, no problem, we'll borrow it.
<br>
<br>
<B>And since we can pin interest rates to zero forever, we can borrow whatever tiny sums we need to pay the interest on hundreds of trillions in new debt, no problem.</B> Except for one little dynamic called <I>debt saturation</I>: future earnings are not guaranteed, and at some point the income cannot sustain both the eternally expanding consumer and state spending needed to keep the <I>Waste Is Growth Landfill Economy</I> from imploding and the rising debt service on the ballooning debt.
<br>
<br>
<B>We can afford only one:</B> either borrow and spend to keep the <I>Waste Is Growth Landfill Economy</I> humming, or we can devote that income to servicing rising debt. We can't do both, so one or the other will collapse: either consumer/state borrowing and spending or the Palace of Debt.
<br>
<br>
<B>This reality increases risk, and capital eventually demands a real return.</B> Interest rates can't stay at zero, so the costs of servicing the soaring debt rises rapidly. At the same time, the immense expansion of credit--money borrowed from future income to be spent today--generates inflation, as the flood of credit needed to keep a sclerotic, dysfunctional status quo afloat outpaces the value being generated by all the trillions being borrowed and blown.
<br>
<br>
<B>No one at the trough of "free money" will give up their place, and so the system is rigged to fail:</B> we have to keep borrowing trillions to keep all the incumbents, entrenched interests and those collecting benefits happy, but as interest payments rise, we need to borrow more trillions just to pay the interest. And so on, in a self-reinforcing feedback loop.
<br>
<br>
<B> 4. <I>Power asymmetry</I> is my term for the structural inequality and bondage that characterize the global status quo.</B> The many have very little power over anything, while the few hoard the power to make sure they keep what they have and to protect their perquisites from competing elites and populist movements. Debt serfdom is a good example of bondage--<I>you need to borrow to live</I>--and <I>power asymmetry</I>: debt-serfs have essentially zero power in the economy, society or the sclerotic systems of governance.
<br>
<br>
<B>No amount of AI or new technology will change any of this, because all those tools serve those already in power.</B> In effect, AI and all other new technologies simply serve to solidify <I>power asymmetry</I> and thus sclerosis and dysfunction. And since the system demands "free money" borrowed from the future to keep everyone at the trough happy, it also guarantees debt saturation, which eventually triggers a <I>phase change</I> much like liquid water (liquidity) suddenly freezing into ice.
<br>
<br>
<B>Everyone at the trough believes that the transition from liquid water (free flowing credit) to ice cannot possibly happen.</B> So when it happens, everyone will be surprised. What do you mean, there are limits?
<br>
<br>
<img src="https://www.oftwominds.com/photos2017/overlapping-crises3-17.png" border="0" align="center"
class="wide">
<br>
<br>
<B><I>New podcast</I></B> <A HREF="https://www.youtube.com/watch?v=GiZjH5vav30" target="resource">
Vision Series: AI Job Challenges and Trends</A> (34:54 min)
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<br>
<HR width="500" color="darkblue">
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<I><B>My recent books:</B></I>
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<br>
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<a target="_blank" href="https://amzn.to/3RbjjUF">
Self-Reliance in the 21st Century</a> print $18,
(<a target="_blank" href="https://amzn.to/3C7BExM">Kindle</A> $8.95,
<A HREF="https://amzn.to/3vs7bpX:" target="resource">audiobook</A> $13.08 (96 pages, 2022)
<A HREF="https://www.oftwominds.com/Self-Reliance-sample2.pdf" target="resource">
<I>Read the first chapter for free (PDF)</I></B></A>
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<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
(Novel) <a target="_blank" href="https://amzn.to/3CTFfP1">print</A> $10.95,
<a target="_blank" href="https://amzn.to/3MQsaum">Kindle</A> $6.95
<A HREF="https://www.oftwominds.com/AHWSM-excerpt2.pdf" target="resource">
<I>Read an excerpt for free</I></A> (PDF)
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<br>
<a target="_blank" href="https://amzn.to/3yvZDFo">
When You Can't Go On: Burnout, Reckoning and Renewal</A>
$18 print, $8.95 <a target="_blank" href="https://amzn.to/3FNLpRJ">Kindle ebook</A>;
<a target="_blank" href="https://https://amzn.to/3AVo3ZZ">audiobook</A>
<A HREF="https://www.oftwominds.com/Burnout-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>
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<a target="_blank" href="https://amzn.to/3lc4eVc">
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
(Kindle $8.95, print $20,
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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
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The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
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Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
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Read the first section for free</A></B>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-12374982218548869532024-03-01T08:46:00.000-08:002024-03-01T08:46:31.862-08:00If AI Is So Great, Why Is Managing the Digital Realm Eating Us Alive?<I>The financial analysts gloating over the prospect of higher corporate profits resulting from firing workers overlook the collapse of customer satisfaction, productivity and leisure. </I>
<br>
<br>
<B>If AI is so great, why are we all wasting so much precious, irreplaceable time deleting spam, unsubscribing from junk email and dealing with multiplying layers of digital incompetence?</B> This is called <I>shadow work</I>: work we perform that isn't paid or even counted as "work," though it eats up our time and energy, leaving us less leisure and more frayed.
<br>
<br>
<B>Work that once was performed by the companies and agencies offering these services has been offloaded onto the customer.</B> The customer must now delete endless spam, unsubscribe from endless junk emails, deal with security breaches, navigate incompetent <I>third-party providers</I>, fill out endless forms relating to privacy--a Kafkaesque bit of humor, given that our data is constantly plundered by hackers--and find their efforts to get anything fixed in the digital realm foiled by AI-chatbots and phone apps.
<br>
<br>
<B>The horror stories are becoming ever more Kafkaesque.</B> To cite one recent example from a reader, the process of qualifying as a professional healthcare provider for payment from Medicare was once a relatively straightforward submission of documents. Now it has been offloaded to a <I>third-party provider</I>--keepers of the inner circle of Digital Hell--which charges $3,000 for providing a truly Kafkaesque labyrinth of frustrating incompetence.
<br>
<br>
Recall that in Kafka's final novel, <A HREF="https://amzn.to/3Im2epc" target="resource">The Castle</A>, the castle is buzzing 24/7 with office workers who are too busy to answer the phone: the work is endless yet nothing gets done.
<br>
<br>
I recounted a few of my own experiences with AI-digital incompetence in <A HREF="https://www.oftwominds.com/blogfeb24/shadow-work2-24.html" target="resource">
Digital Service Dumpster Fires and Shadow Work</A>:
<br>
<br>
<I>
Digital services--the foundation of the digital economy--are dumpster fires we're supposed to put out ourselves. The services are broken, dysfunctional rubbish, and yet somehow the agencies or corporations that are responsible for the endless dumpster fires of their digital interfaces have shifted the burdens of this incompetence onto the consumer / customer, who is supposed to put the fire out ourselves and make do with the smoldering sludge at the bottom of the dumpster.</I>
<br>
<br>
<B>The financial analysts gloating over the prospect of higher corporate profits resulting from firing workers overlook the collapse of customer satisfaction, productivity and leisure.</B> AI is creating additional layers of frustrating, time-sink <I>shadow work</I>, and the only possible conclusion is that <B>AI--as instantiated by corporations and public agencies--is innately incompetent.</B> The entire system of digital services is a wretched mess of incompetence and <I>shadow work</I> dumped on a public corralled by monopolies and cartels and a compliance-obsessed bureaucracy of state/federal agencies.
<br>
<br>
Cory Doctorow summarized the situation rather neatly: <I>"One of the truest things I know about AI is: 'we're nowhere near a place where bots can steal your job, we're certainly at the point where your boss can be suckered into firing you and replacing you with a bot that fails at doing your job.'"</I></I>
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/competence2a.png" border="0" align="center"
class="wide">
<br>
<br>
One wonders what we're paying for via taxes, products and services, when we end up having to do so much of the work ourselves, at the cost of our productivity, leisure and mental health.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/comic-illusion.png" border="0" align="center"
class="wide">
<br>
<br>
<B><I>New podcast</I></B> <A HREF="https://www.youtube.com/watch?v=GiZjH5vav30" target="resource">
Vision Series: AI Job Challenges and Trends</A> (34:54 min)
<br>
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<HR width="500" color="darkblue">
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<I><B>My recent books:</B></I>
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<a target="_blank" href="https://amzn.to/3RbjjUF">
Self-Reliance in the 21st Century</a> print $18,
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<A HREF="https://www.oftwominds.com/Self-Reliance-sample2.pdf" target="resource">
<I>Read the first chapter for free (PDF)</I></B></A>
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<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
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<a target="_blank" href="https://amzn.to/3MQsaum">Kindle</A> $6.95
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<I>Read an excerpt for free</I></A> (PDF)
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<a target="_blank" href="https://amzn.to/3yvZDFo">
When You Can't Go On: Burnout, Reckoning and Renewal</A>
$18 print, $8.95 <a target="_blank" href="https://amzn.to/3FNLpRJ">Kindle ebook</A>;
<a target="_blank" href="https://https://amzn.to/3AVo3ZZ">audiobook</A>
<A HREF="https://www.oftwominds.com/Burnout-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>
<br>
<br>
<a target="_blank" href="https://amzn.to/3lc4eVc">
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
(Kindle $9.95, print $24, <a target="_blank" href="https://www.amazon.com/dp/B09VCNSSDB/">audiobook</A>)
<A HREF="https://www.oftwominds.com/Global-Crisis-National-Renewal-sample.pdf" target="resource">
Read Chapter One for free (PDF)</A>.
<br>
<br>
<a target="_blank" href="https://www.amazon.com/gp/product/B08HJWR4VC/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08HJWR4VC&linkCode=as2&tag=charleshughsm-20&linkId=000dd63f47205f26b52a959cb4769242">
A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
(Kindle $8.95, print $20,
<a target="_blank" href="https://www.amazon.com/gp/product/B08PQ4FYPV/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08PQ4FYPV&linkCode=as2&tag=charleshughsm-20&linkId=39f4ad82c7b1a6c6a6044daa3b6790bd">
audiobook</A> $17.46)
<A HREF="https://www.oftwominds.com/AHT-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>.
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<a target="_blank" href="https://www.amazon.com/gp/product/B082VLQBQ3/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B082VLQBQ3&linkCode=as2&tag=charleshughsm-20&linkId=87deea89ddfe8dbf52738aebbf7f7ef4">
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World</a>
<br>
(Kindle $5, print $10, audiobook)</A>
<A HREF="https://www.oftwominds.com/Richer-Poorer-sample.pdf" target="resource">
Read the first section for free (PDF)</A>.
<br>
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<I><a target="_blank" href="https://www.amazon.com/gp/product/B07G7R9Y9B/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B07G7R9Y9B&linkCode=as2&tag=charleshughsm-20&linkId=f2eedd137f2f10768d49846b931e6f21">
The Adventures of the Consulting Philosopher: The Disappearance of Drake</a> (Novel)
$4.95 Kindle, $10.95 print);
<A HREF="https://www.oftwominds.com/TCP-sample2.pdf" target="resource">read the first chapters
for free (PDF)</A></I>
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<a target="_blank" href="https://www.amazon.com/gp/product/B077S8PJ5Y/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B077S8PJ5Y&linkCode=as2&tag=charleshughsm-20&linkId=d3a935e067cb9a216e52fce67fa627b6">
Money and Work Unchained</A> $6.95 Kindle, $15 print)</I>
<A HREF="https://www.oftwominds.com/Money-Work-free.pdf" target="resource">
Read the first section for free</A></B>
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<div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-37565686606754808542024-02-28T10:05:00.000-08:002024-02-28T10:05:30.603-08:00Who Error-Corrects AI?<I>Part of why AI chatbots are so dreadful is we know the corporation / agency doesn't care whether our problem gets resolved or not.</I>
<br>
<br>
<B><I>Please note:</B> Of Two Minds subscription rates are going up this Friday 3/1/24 from $5/month or $50/year to $7/month or $70/year, so subscribe by Thursday if you want to lock in current rates. If you're considering subscribing, please read the comment from Substack subscriber Kelly at the end of the post.</I>
<br>
<br>
<B>Click-bait-scary forecasts of hundreds of millions of jobs lost to AI are as ubiquitous as incompetent AI chatbots.</B> Richard Bonugli and I recently took a more nuanced look at <A HREF="https://www.youtube.com/watch?v=GiZjH5vav30" target="resource">AI Job Challenges and Trends</A>, with the goal not of throwing the baby out with the bathwater (i.e. concluding all AI is junk science) but of focusing on AI's limits in real-world problem-solving.
<br>
<br>
<B>We can summarize these limits in one question: <I>who error-corrects AI?</I></B> the intrinsic problem here is <I>data harvesting machine learning</I>--the essence of Large Language Model (LLM) AI and other machine learning approaches--is <I>the illusion of precision</I>: the model selects the correct diagnosis 95% of the time, but who's going to error-correct the vital 5%?
<br>
<br>
<B>Consider being a patient with cancer that receives an all-clear/no-cancer diagnosis from an AI processed scan.</B> In other words, consider the consequences of the AI tool being wrong 5% of the time. In the case of cancer diagnoses, a wrong diagnosis can be a death sentence, or it can open a pathway to unnecessary treatments and surgeries.
<br>
<br>
<B><I>The illusion of precision</I> leads to fatal assumptions:</B> if the AI error rate is "only" 5%, but the majority of the 5% errors are the most consequential, then the entire idea of basing accuracy on the percentage of correct / incorrect hits is grievously flawed. In effect, AI might be accurate on the 95% of cases with limited consequences and mostly inaccurate on the cases that really matter, but this reality is lost in the claim that it's 95% accurate.
<br>
<br>
<B><I>Data harvesting machine learning</I> is useless when problem-solving boils down to individual cases.</B> Consider a modern vehicle, which is essentially a rolling platform of software. Each vehicle has a diagnostic port that the mechanic uses to detect what system / component has failed, but this doesn't automatically solve 100% of the problems that crop up in complex machines.
<br>
<br>
Having a model that predicts the likelihood of the source of unidentified mechanical problems is useful in the sense that the model predicts where to start the investigation, but it doesn't actually identify the problem with this vehicle. That requires a physical presence and experience beyond any model's guesstimate. Someone has to actually drop the engine to reach the failed control board. That someone performs both the essential tasks in actually repairing the vehicle: error-correction and the physical work of doing the repair.
<br>
<br>
The physician who reviews the AI scan results brings real-world experience that cannot be codified in data harvesting.
<br>
<br>
<B>AI is being touted in cases that largely fall into the <I>service sector</I></B> such as customer service. (As I've outlined recently, the real-world results have been abysmal, simply reinforcing the trend of making customers do all the work, i.e. <I>shadow work</I>.) <A HREF="https://www.oftwominds.com/blogfeb24/shadow-work2-24.html" target="resource">Digital Service Dumpster Fires and Shadow Work</A>.
<br>
<br>
<B>In the real world of work, AI can't actually repair the rotted handrailing or install the piping.</B> AI tools may well offer potentially useful guidelines or help get the needed materials onsite logistically, the but actual work in the field is most cost-effectively performed by humans with long experience.
<br>
<br>
<B>Another intrinsic limit in AI is the <I>high-touch, low-touch</I> divide.</B> A physician with 40 years of experience recently told me that patients report feeling better after being seen by a nurse or doctor, and we can intuit why: they feel better because someone cares about them and their health enough to actually be physically present. Another experienced physician once told me that he'd concluded many of his patients sought an appointment with him just to have someone listen to them.
<br>
<br>
<B>These are examples of high-touch experiences that cannot be replaced with low-touch robotic voices and printouts.</B> There are many others. Do you want your hair cut by your barber, who has become a friend of sorts, or a robot? Do you recall with fondness a particular dinner because the wait staff was charming and attentive without being overbearing?
<br>
<br>
<B>Part of why AI chatbots are so dreadful is we know the corporation / agency doesn't care whether our problem gets resolved or not.</B> Simply put, replacing human interactions with sterile AI interactions fails at the human level. If we grasp this reality, we realize humans cannot be replaced by AI except at the most superficial low-touch level.
<br>
<br>
<B>In real world situations, AI can't be said to "understand" problems.</B> It's good at statistically identifying the most likely subsets of solutions and presenting those possibilities in a form that can be compared to actual results, and assigning a confidence level to each of its predictions. <B>But this doesn't mean it's diagnoses or solutions are accurate</B> or that it's right in the most critical, consequential situations.
<br>
<br>
<B>What's interesting is the really hard problem AI is incapable of solving is how to manage the unintended consequences of its runaway expansion in our global socio-economic system.</B> There is more on this in my book <a target="_blank" href="https://www.amazon.com/gp/product/1691549444/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1691549444&linkCode=as2&tag=charleshughsm-20&linkId=8c27a6ab0ba537361cdd772734d71978">
Will You Be Richer or Poorer?: Profit, Power and A.I. in a Traumatized World</A>.
<br>
<br>
<A HREF="https://www.youtube.com/watch?v=GiZjH5vav30" target="resource">
Vision Series: AI Job Challenges and Trends</A> (34:54 min)
<br>
<br>
<img src="https://www.oftwominds.com/photos2023/Bloom-County-AI2a.png" border="0" align="center"
class="wide">
<br>
<br>
<B><I>Comment from Substack subscriber Kelly</B>:
"I supported your work because of the ultimate purpose of your writing: taking control of and improving our own well-being and security. Plus, you sound a lot like my father (who has been gone for many, many years and I miss him). I feel like your writing is a reflection of what he would be telling me now about how to deal with the days, weeks and years to come. Thank you."</I>
<br>
<br>
<br>
<HR width="500" color="darkblue">
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<br>
<I><B>My recent books:</B></I>
<br>
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<I>Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.</I>
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<br>
<I>
<a target="_blank" href="https://amzn.to/3RbjjUF">
<B>Self-Reliance in the 21st Century</a> print $18,
(<a target="_blank" href="https://amzn.to/3C7BExM">Kindle</A> $8.95,
<A HREF="https://amzn.to/3vs7bpX:" target="resource">audiobook</A> $13.08 (96 pages, 2022)
<A HREF="https://www.oftwominds.com/Self-Reliance-sample2.pdf" target="resource">
<I>Read the first chapter for free (PDF)</I></B></A>
<br>
<br>
<a target="_blank" href="https://amzn.to/3CTFfP1">The Asian Heroine Who Seduced Me</A>
(Novel) <a target="_blank" href="https://amzn.to/3CTFfP1">print</A> $10.95,
<a target="_blank" href="https://amzn.to/3MQsaum">Kindle</A> $6.95
<A HREF="https://www.oftwominds.com/AHWSM-excerpt2.pdf" target="resource">
<I>Read an excerpt for free</I></A> (PDF)
<br>
<br>
<a target="_blank" href="https://amzn.to/3yvZDFo">
When You Can't Go On: Burnout, Reckoning and Renewal</A>
$18 print, $8.95 <a target="_blank" href="https://amzn.to/3FNLpRJ">Kindle ebook</A>;
<a target="_blank" href="https://https://amzn.to/3AVo3ZZ">audiobook</A>
<A HREF="https://www.oftwominds.com/Burnout-sample2.pdf" target="resource">
Read the first section for free (PDF)</A>
<br>
<br>
<a target="_blank" href="https://amzn.to/3lc4eVc">
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States</a>
(Kindle $9.95, print $24, <a target="_blank" href="https://www.amazon.com/dp/B09VCNSSDB/">audiobook</A>)
<A HREF="https://www.oftwominds.com/Global-Crisis-National-Renewal-sample.pdf" target="resource">
Read Chapter One for free (PDF)</A>.
<br>
<br>
<a target="_blank" href="https://www.amazon.com/gp/product/B08HJWR4VC/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B08HJWR4VC&linkCode=as2&tag=charleshughsm-20&linkId=000dd63f47205f26b52a959cb4769242">
A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-32114119428576812342024-02-26T11:46:00.000-08:002024-02-26T11:46:54.401-08:00Rates, Risk and Debt: The Unavoidable Reckoning Ahead<I>Policy errors have consequences, and we're only in the first inning of those consequences. </I>
<br>
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<br>
<B>If we ask, "what's changed?," two under-appreciated dynamics pop out: <I>risk and consequences</I>:</B> risks are rising globally in a multi-dimensional self-reinforcing way, and the consequences of the Federal Reserve's 14-year policy error known as ZIRP--zero interest rate policy--are finally manifesting in unwelcome ways.
<br>
<br>
<B><I>The Great Moderation</I> is a term often invoked to describe the multi-decade reduction in global risks from 1990 to 2020.</B> Geopolitical tensions diminished, the entry of China's vast workforce and productive capacity lowered the costs of labor and production, effectively suppressing inflationary forces, and the financial markets responded by demanding less of a risk premium on the price of bonds and credit: a reduction in inflationary pressure and risk led to a gradual reduction in yields and interest rates.
<br>
<br>
<B>Global risks are now rising, as are inflationary pressures.</B> China's inflationary monetary and fiscal policies have raised wages and costs, ending the era of China <I>exporting deflation.</I> The Federal Reserve's 14-year suppression of interest rates to near-zero as it opened the floodgates of credit has finally generated consequences: inflationary pressures can no longer be put back in the bottle, for a variety of reasons, including unfavorable demographics, global changes in supply chains, resource depletion, and so on.
<br>
<br>
<B>The Fed's ZIRP policy error also inflated a series of asset bubbles,</B> as those with access to the Fed's <I>nearly free money</I> used this money to bid up income-producing assets, a decade-long <I>behavior-modification program</I> that incentivized rampant leverage and speculation which pushed asset prices into a parabolic rise.
<br>
<br>
<B>This generated a "wealth effect," long believed to be a core Fed goal:</B> with household wealth soaring, the top 10% who owns the vast majority of the financial assets certainly feel richer. Those living paycheck to paycheck made use of lower interest rates to load up on debt: student loans, auto-truck loans, credit cards, etc.
<br>
<br>
<B>Federal and local government spending also soared as public-sector borrowing skyrocketed.</B> Super-low borrowing costs invited spending sprees, both public and private.
<br>
<br>
<B>Now the economy is dependent on historically unprecedented low rates of interest or it collapse in a heap.</B>
But the stagflationary forces unleashed by the Fed's 14-year policy error cannot be suppressed; even worse, the Fed's usual "fixes"--flooding the economy with liquidity and lowering rates--actually adds fuel to the stagflationary fires.
<br>
<br>
<B>What few observers seem to grasp is the Federal Reserve is a <I>closed system</I>, which creates an illusion of godlike control</B> as closed systems have limited inputs and processes, and so the output can be tweaked / controlled.
<br>
<br>
<B>But the economy is an open, dynamic system, and rock-bottom yields and interest rates generate self-reinforcing feedback loops that generate forces beyond the Fed's control.</B> The Fed's apparent control of yields and interest rates generated an illusory belief that the Fed could also control the consequences of their 14-year ZIRP policy error. This illusion is unraveling in real time, and the consequences cannot be controlled by lowering interest rates or flooding the financial sector with liquidity.
<br>
<br>
<B>If stagflation and global risks continue to rise, the Fed will have to raise rates, not lower them.</B> Or private capital will demand higher risk premiums regardless of what the Fed does, in effect forcing the Fed's hand.
<br>
<br>
<B>Note that rates are simply within a long-term range of between 3% and 5%.</B> But even 5% rates are crushing the economy, a reality currently being masked by rapid expansion of public and private debt and the resulting <I>doom spending</I>--spending borrowed money like there's no tomorrow.
<br>
<br>
<B>But there is a tomorrow, and so leverage and speculations that only made sense in a ZIRP fantasy land will implode, popping the speculative mania asset bubbles generating the wealth effect.</B> This will generate the dreaded <I>reverse wealth effect</I> in which the wealthy feel poorer and less motivated to borrow and spend freely.
<br>
<br>
<B>Recall that every dollar that must be devoted to debt service (paying interest and principal) is a dollar that cannot be spent on consuming goods and services.</B> So rising rates eventually crush consumer spending. Ironically, lowering rates will boost inflation, which has the same effect: the purchasing power of consumers' wages plummets, reducing the quantity of goods and services they can afford to buy.
<br>
<br>
<B>I've been writing about <I>debt saturation</I> for 15 years, and perhaps we're finally seeing <I>debt saturation</I> take hold:</B> <I>debt saturation</I> means borrowers have maxed out their capacity to borrow more: they lack the income and/or collateral to borrow more, and as rates rise, their spending declines accordingly. This is stagflation: no real growth yet prices continue to edge higher as risks and inflationary feedbacks continue apace.
<br>
<br>
<B>In summary: policy errors have consequences, and we're only in the first inning of those consequences.</B>
Here is long-term chart of 10-year Treasury bond yields. The Great Depression and World War II were both unique circumstances, and it is folly to use these as analogs supporting the illusion that rates can hover near zero forever. Note what happens when stagflation takes hold: rates rise, or inflation undermines the economy. There are no painless choices left.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/10-yr-chart2-24a.png" border="0" align="center"
class="wide">
<br>
<br>
Here we see the long-term range of 10-year Treasury bond yields, and how the Fed made a soon-to-be horrendously painful policy error in imposing ZIRP for 14 long years.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/10-yr-yield2-24a.png" border="0" align="center"
class="wide">
<br>
<br>
Nothing to see here, just a 10-fold increase in the Fed's balance sheet:
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/fed-BS2-24.png" border="0" align="center"
class="wide">
<br>
<br>
Notice how federal debt took off in the era of ZIRP: free money, hey, might as well grab some and spend it.
<br>
<br>
<img src="https://www.oftwominds.com/photos2023/fed-debt4-23a.png" border="0" align="center"
class="wide">
<br>
<br>
The resulting speculative mania asset bubbles boosted household net worth: OK, so most of the gains went to the top 0.1%, top 1% and top 5%, but in aggregate it paints a pretty picture: everyone's richer, thank you, Fed!
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/household-worth2-24.png" border="0" align="center"
class="wide">
<br>
<br>
<B>Thank you, Fed, for the coming decade of asset deflation, real-world inflation, debt saturation and the upward spiral of stagflation.</B> Too bad the Fed's levers only control <I>behavior modification</I>, not the real world.
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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet</a>
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</table><div class="blogger-post-footer">Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.</div>Charles Hugh Smithhttp://www.blogger.com/profile/12991955853189070212noreply@blogger.comtag:blogger.com,1999:blog-33848955.post-81370823147411521082024-02-23T10:05:00.000-08:002024-02-23T10:05:18.060-08:00How the Economy Changed: There's No Bargains Left Anywhere<I>What changed in the economy is now nobody can afford to get by on working-class wages because there's no longer any bargains. </I>
<br>
<br>
<B>The economy has changed in many ways, and it's difficult to track the glacial movements over decades.</B>
One change that few seem to recognize or discuss is the disappearance of bargains: cheap rent, cheap meals at hole-in-the-wall restaurants, cheap transport, cheap travel, cheap services--all gone.
<br>
<br>
<B>Back in the day, even stupidly expensive cities like San Francisco had working-class districts with cheap rent and cheap eats.</B> One reason the hippie movement arose in San Francisco was the availability of cheap places to rent in what many would dismiss as rundown slums or ghettos. There were plenty of working-class hole-in-the-wall restaurants and cafes that served cheap plates of spaghetti, turkey legs and other affordable fare.
<br>
<br>
<B>The working-class districts in cities have long been gentrified</B>, or more recently, abandoned to homeless encampments. Gentrification eliminates cheap rents, as the soaring valuations of real estate leads the new owners to charge high rents in order to pay their lofty mortgages.
<br>
<br>
Affordable apartments disappear, and so do affordable small commercial / retail spaces for hole-in-the-wall bookstores (remember when these were commonplace?), cafes, odd little niche retailers, and low-cost services (shoe repair, etc.)
<br>
<br>
<B>The extermination of low-cost commercial space eliminated many services which are no longer available, a trend that feeds the "waste is growth" Landfill Economy:</B> there's nobody left to repair anything or move second-hand goods, so everything that once could have been repaired or re-used is tossed in the landfill, replaced by a shoddy, crapified replacement product of the global economy.
<br>
<br>
<B>One person's affordable housing is another person's slum or ghetto.</B> <I>Urban Renewal</I> destroyed affordable housing and vibrant ethnic neighborhoods, in the name of "improvement" which ended up displacing those who could no longer afford soaring rents.
<br>
<br>
<B>The end result is many people are spending half or 2/3 of after-tax earnings on rent.</B> Personally, I was only able to work my way through college because there were still nooks and crannies of low-rent dives and rooming houses, and low-cost hole-in-the-wall restaurants and cafes, day-old baked goods outlets, etc.
<br>
<br>
<B>Lowering the cost of credit for corporations, financiers and the wealthy created unprecedented competition for places to invest all this <I>nearly free money</I>, and real estate has long been a favored market</B> for those seeking to increase income and appreciation by gentrifying low-cost properties.
<br>
<br>
<B>The net result is nobody can afford to start a business because rents, insurance, fees, utilities and regulatory compliance are all unaffordable,</B> And so downtowns and once vibrant retail streets are half-empty or abandoned. All the little cafes, services, second-hand stores are all gone because these are inherently low-margin businesses that can't afford rent in the thousands per month.
<br>
<br>
<B>Something else changed, too: the proprietors who operated these small, affordable businesses are gone.</B> The proprietors could charge affordable rates for their services because their own cost of living was low. Once the cost of living skyrocketed, they could no longer afford to get by on the meager earnings of their affordable enterprise. So they sold their building, or retired and moved out of the city to cheaper regions.
<br>
<br>
<B>Who's left who wants to work the long hours needed to operate small enterprises, and rely on uncertain / low net income?</B> Very few people are willing to take these risks, and few can afford to take these risks.
<br>
<br>
<B>Financialization--and the resulting competition of those with unlimited access to low-cost credit for real estate to "develop"--eliminated all the bargains.</B> Once rents soared, nobody could afford to offer bargains. The price of everything soared and those with cheap rents were forced out of business by rising rents and gentrification.
<br>
<br>
<B>What changed in the economy is now nobody can afford to get by on working-class wages because there's no longer any bargains.</B> Life used to be good for those with modest incomes because there were still bargains to be had. Not any more. Life is now a struggle because it's no longer affordable.
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/family-budget.jpg" border="0" align="center"
class="wide">
<br>
<br>
<B>Not everyone is suffering, of course.</B> The corporations selling junk products and services are doing just fine:
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/corp-profits1-24a.png" border="0" align="center"
class="wide">
<br>
<br>
As are those who own 90% of the income-producing assets:
<br>
<br>
<img src="https://www.oftwominds.com/photos2024/wealth-inequality1-24A.png" border="0" align="center"
class="wide">
<br>
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