Tuesday, June 02, 2020

The Post-Covid Economy Will Be Very Different From the Pre-Pandemic Bubble Economy

As the old models break down, opportunities for new models will arise.
Unstable, unsustainable systems can lull observers into a comfy complacency as instability increases beneath a thin veneer of apparent stability.
That's the systemic story of the past 20 years: all the extremes that were needed to maintain the veneer of stability have increased the instability building beneath the complacent confidence.
But sadly for the status quo, all bubbles pop, all extremes revert to the mean and all that is unsustainable implodes as apparently linear systems (snow accumulating on a mountainside) suddenly go non-linear (avalanche).
The majority of the Pre-Pandemic Bubble Economy was unsustainable:
1. Bubbles in the stock market and housing-- unsustainable
2. Soaring debt: corporate, household and public-- unsustainable
3. College costs paid by trillions of dollars in student loan debt-- unsustainable
4. Healthcare consuming 20% of the GDP-- unsustainable
5. Bubble in commercial real estate (CRE) -- unsustainable
6. Long supply chains to Asia-- unsustainable
7. Fracking industry dependent on ever-expanding debt to fund operations-- unsustainable
8. Over-supply and over-capacity for almost everything-- unsustainable
I could go on but you get the idea.
As I've been discussing in recent months, these unsustainable systems are tightly bound and incredibly fragile. Each is a row of dominoes that intersect with all the other rows, so one domino falling in any row will topple all the dominoes in every row.
Consider just one unsustainable sector: commercial real estate. Thanks to decades of overbuilding caused by the Federal Reserve's super-low interest rates, there is too much commercial space in the U.S.: too much retail space, too much office space, too much self-storage, etc. There are also too many new buildings on soon-to-be empty college campuses and too many hotels, etc.
The decimation of retailers has been underway for the past four years. The chart below is from 2017, and the store closures have only accelerated.
The U.S. has between 8 and 10 times more retail space than other developed economies. That suggests 50% or more of all the commercial retail space in America is superfluous.
The demand for commercial space is crashing, and nose-bleed valuations are under pressure. This charts shows that valuations could fall in half--and that wouldn't necessarily rebalance supply and demand.
All the trillions of dollars in debt piled on over-valued CRE is at risk of default. That alone will trigger a widening financial crisis as the dominoes fall.
As Richard Bonugli and I discuss in our recent podcast on "the new normal," as the old models break down opportunities for new models will arise. For example, the entire education complex based on the outdated, dysfunctional "factory model" of large campuses and hundreds or thousands of students packed together is ripe for disruption.
Why not have small decentralized classes without the bloated administration and centralized curriculum--not to mention the improved security of small, decentralized groups? In my book The Nearly Free University I describe how small, decentralized "apprenticeship" groups could improve actual learning while eliminating the entire bloated administration and campus costs (lab work could be performed onsite in existing work places).
Rather than accredit the institution, accredit the student.
The unsustainably costly healthcare sector is equally ripe for disruption as demand destruction and soaring costs undermine the current model of profiteering.
Decentralizing the economy sacrifices the long global supply chains and corporate monopolies for local jobs and local supply chains. All the corporate and state monopolies and cartels that have hollowed out the economy and the social order were exploitive, parasitic and predatory as well as unsustainable, and their slide into the dustbin of history is accelerating as linear systems cascade into non-linear dynamics.
The post-Covid economy will be very different from the pre-pandemic bubble economy, in ways few anticipate: non-linear creative destruction and DeGrowth will be the dominant dynamics. Models that obsolete the old, unsustainable, dysfunctional models will blossom, and that is how civilization advances.
Maybe "shareholder value" has been the greatest con in history, a PR cover story for the greatest rise in wealth and power inequality in American history.
Recent Podcasts:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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Monday, June 01, 2020

Truth Is What We Hide, Cover Stories Are What We Sell

The fact that self-serving cover stories are now the norm is making it difficult to love our servitude with the slavish devotion demanded of us.
The need to suppress the truth and competing narratives arose with the emergence of urban elites whose power and wealth were threatened by any exposure of the self-serving nature of their rule.
Though suppression of the truth has a long history, it accelerated in the 20th century as totalitarian regimes embraced the technologies of mass communication and the marketing techniques of propaganda.
With the decay of the social contract and the emergence of monopolistic search and social media platforms, the suppression of competing narratives has accelerated as ruling elites tighten their grip in response to the unraveling of the social order.
Thus we get Federal Reserve Comedian Jay Powell claiming the Fed doesn't create wealth inequality, when it's pathetically obvious the Fed is the primary engine of wealth inequality. (Give me $10 billion at near-zero interest rates and I'll get rich, too.)
We can summarize the current era in one sentence: truth is what we hide, cover stories are what we sell. Jean-Claude Juncker's famous quote captures the essence of the era: "When it becomes serious, you have to lie."
And when does it become serious? When the hidden facts of the matter might be revealed to the general public. Given the regularity of vast troves of well-hidden data being made public by whistleblowers and white-hat hackers, it's basically serious all the time now, and hence the official default everywhere is: truth is what we hide, self-serving cover stories are what we sell.
The self-serving cover stories always tout the nobility of the elite issuing the PR: we in the Federal Reserve saved civilization by saving the Too Big To Fail Banks (barf); we in the corporate media do investigative reporting without bias (barf); we in central government only lie to protect you from unpleasant realities--it's for your own good (barf); we in the NSA, CIA and FBI only lie because it's our job to lie, and so on.
Three essays published long before the pandemic speak to the degradation of data and factual records in favor of self-serving cover stories and totalitarian political correctness.
"It's not just that isolated individuals are unmasked as corrupt or self-interested (something that is as old as politics), but that the establishment itself starts to appear deceitful and dubious. The distinctive scandals of the 21st century are a combination of some very basic and timeless moral failings (greed and dishonesty) with technologies of exposure that expose malpractice on an unprecedented scale, and with far more dramatic results.
Perhaps the most important feature of all these revelations was that they were definitely scandals, and not merely failures: they involved deliberate efforts to defraud or mislead. Several involved sustained cover-ups, delaying the moment of truth for as long as possible.
(The selective coverage) "generated a sense of a media class who were adept at exposing others, but equally expert at concealing the truth of their own behaviours.
Several of the defining scandals of the past decade have been on a scale so vast that they exceed any individual's responsibility. The Edward Snowden revelations of 2013, the Panama Papers leak of 2015 and the HSBC files (revealing organised tax evasion) all involved the release of tens of thousands or even millions of documents. Paper-based bureaucracies never faced threats to their legitimacy on this scale."
From the Late Founder and Editor Robert Parry of the Consortium for Independent Journalism (via John S.P.)
When I was a young reporter, I was taught that there were almost always two sides to a story and often more. I was expected to seek out those alternative views, not dismiss them or pretend they didn't exist. I also realized that finding the truth often required digging beneath the surface and not just picking up the convenient explanation sitting out in the open.
But the major Western news outlets began to see journalism differently. It became their strange duty to shut down questioning of the Official Story, even when the Official Story had major holes and made little sense, even when the evidence went in a different direction and serious analysts were disputing the groupthink.
Looking back over the past two decades, I wish I could say that the media trend that we detected in the mid-1990s had been reversed. But, if anything, it's grown worse. The major Western news outlets now conflate the discrete difficulties from made-up 'fake news' and baseless 'conspiracy theories' with responsible dissenting analyses. All get thrown into the same pot and subjected to disdain and ridicule.
In truth, facts today are deemed controversial if they deviate from accepted narratives, and professors must self-censor out of fear of being condemned and losing their jobs.
Based on conversations I've had with colleagues still working in academia and from what I can tell about recent cases of censorship, the antagonism is primarily from left-leaning colleagues attacking other liberals.
These instances are indicative of a larger, worrisome trend -- instead of debating contentious ideas, those in opposition to them throw words ending in '-phobic' around, shutting the conversation down and pretending they don't exist.
For those who say ideas that denigrate members of society shouldn't be entertained, silencing the debate doesn't make hateful beliefs go away. In many cases, it isn't controversial findings that pose a threat; the threat comes from the possibility that others will use these facts to justify discrimination. But it's important that we distinguish between an idea and the researcher putting forth that idea, and the potential for bad behaviour.
With academics avoiding entire areas of research as a result, knowledge currently being produced is constrained, replaced by beliefs that are pleasant-sounding but biased, or downright nonsensical. The recent 'grievance studies' investigation, led by academics Peter Boghossian, James Lindsay and Helen Pluckrose, laid bare how bad the problem has become. The trio managed to get seven fake papers (but oh-so politically correct and hence "good to go"--CHS) accepted in high-ranking humanities journals.
In a consumerist-based culture accustomed to 24/7 selling of one self-serving story or another, the fact that self-serving cover stories are now the norm is making it difficult to love our servitude with the slavish devotion demanded of us. I've noticed a new twist on self-serving propaganda: an alternative opinion isn't debated, it's debunked, as if questioning the authorized narrative is by definition a "conspiracy theory" that can be "debunked" by repeating the authorized cover story enough times.
Of related interest:
Orwell and Kafka Do America (March 24, 2015)
The Ghosts of 1968 (February 14, 2018)
Recent Podcasts:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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We're Living the Founding Fathers' Nightmare: America Is Corrupt to the Core

Our ruling elites, devoid of leadership, are little more than the scum of self-interested, greedy grifters who rose to the top of America's foul-smelling stew of corruption.
The Founding Fathers were wary of institutional threats to liberty and the citizenry's sovereignty, which included centralized concentrations of power (monarchy, central banks, federal agencies, etc.) and the tyranny of corruption unleashed by small-minded, self-interested, greedy grifters who saw all elected offices and positions of government influence as nothing more than a means to increase their own private wealth.
The Founders feared the dominance of self-interested, greedy grifters because they had no concept of the public good: to the greedy grifters, the government existed solely to serve their petty private interests and the interests of their fellow grifters.
The Founders understood that a republic required disinterested leadership capable of looking past petty self-interest to the common good of the people and their nation. They feared the election of self-interested, greedy grifters because once no one served the common good, the republic would fall into a fatal disunity.
We are living the Founders' nightmare, for America is corrupt to the core. While everyone gorging at the public trough bleats about the "common good," their single-minded focus is on aggrandizing as much power and private wealth as possible, and feeding their corrupt crew of insiders, lobbyists, "business interests," bankers and assorted other legalized looters.
America has plenty of law enforcement, prosecutors and prison cells for those who loot a Whole Foods, but none for those who loot the public treasury, commit stock market swindles or financial fraud on a monumental scale. Not only did no one go to prison for the rampant institutionalized fraud of the 2008 looting, a.k.a. the Global Financial Meltdown--the looters were bailed out by the Federal Reserve and Treasury.
More recently, no one was even questioned when a biotech company issued a press release about a Covid-19 vaccine trial that boosted the stock's price just long enough for insiders to dump millions of dollars of shares on a credulous public and also sell new shares in the company at a premium: a classic looting strategy known as pump and dump.
Members of Congress were caught red-handed in what amounted to insider trading, selling millions of dollars in their stock portfolios based on their secret briefings of the coming pandemic, while they reassured the public Covid-19 was no biggie. The farcical "investigation" found no wrong-doing.
Corruption in our political parties is so endemic nobody even bothers listing it except as a parlor game of pondering which party is more corrupt.
Our ruling elites, devoid of leadership, are little more than the scum of self-interested, greedy grifters who rose to the top of America's foul-smelling stew of corruption. As for the nation's infinitely greedy billionaires, if there was any justice left in America, Apple CEO Tim Cook would be rotting in a cell on Devil's Island for buying back billions of dollars of Apple stock--buybacks were illegal not that long ago.
The cells next to his would be crowded with Big Pharma CEOs who advertised their products directly to consumers--also illegal not so long ago.
America is now a pay-to-play paradise of greed and corruption. The "public good" is a PR cover for legalized looting, much of which now depends on the Federal Reserve's free money for financiers, parasites and predators.
If you think this is far too harsh on our current crop of greedy grifters and looters, please read historian Gordon Wood's epic account Empire of Liberty: A History of the Early Republic, 1789-1815, which details the many critical debates between founders with fundamentally different views of what structures and safeguards were essential for the Republic's survival.
When we look back at the genius of Hamilton, Madison, et al., and Washington's obsession with ethics and promoting national unity, we are forced to weep for the pathetic, venal scum that passes for "leadership" in America today. The feedback loops the Founders designed to restrain the tyranny of corruption have all failed, as the biggest looters serve their interests under the guise of legality.
The Founders' weren't saints; they were flawed as are all humans, and like all humans, they were products of their era. But they did have a keen, abiding sense of the public good, and when they clashed over ideas about banking, the power of the presidency, etc., it was not for personal gain but for their vision of the common good.
If any of America's "leadership" over the past 30 years had an ounce of concern for the common good, why did they enable financialization and globalization to hollow out the nation's economy and social order? Why did they enable the frauds, skims, scams, cartels and monopolies that are the foundation of virtually every American billionaire's "we pay no taxes" empires of greed?
The tyranny of corruption thrives in an amoral cesspool of anything goes and winners take all.
In today's America, the tyranny of corruption has been so normalized that America's polarized populaces are blind to the profound corruption of their parties and institutions. As in the last days of the Western Roman Empire, the masses are made complicit with bread and circuses, mimicking their "leaders" debasement of the public good to feeding at the public trough.
These are the troubled years that came before the deluge (Jackson Browne), for as Mr. Dylan put it, a hard rain's a-gonna fall.
Recent Podcasts:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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