Friday, May 22, 2020

Opting Out, American Style

Virtually nothing in America's top-down financial and political realms is actually transparent, accountable, authentic or honest.
Opting out will increasingly be the best (or only) choice for tens of millions of people globally. Opting out means leaving the complicated, costly and now unaffordable / unbearable life you've been living for a new way of life that is radically less complex, less costly and less deranging.
Opting out is as diverse as the individuals who choose to opt out. For many people in China, for example, the obvious choice when you've lost your job and can no longer afford expensive urban life is to return to your ancestral village, where you're likely to have grandparents, parents or aunts / uncles with a house and a patch of agricultural land.
Since urbanization has been a feature of American society for generations, this is not an option for most Americans, who are by and large rootless cosmopolitans who rarely even know their neighbors, as they move around the country out of necessity or ambition.
Just as "capitalism is no longer attractive to capitalists," (per Wallerstein), urban living has lost its luster in ways few dare even discuss. Urban centers on the Left and Right Coasts have been magnets for jobs and capital, drawing in hundreds of thousands of new residents seeking higher paying employment. This vast influx pushed rents and housing valuations to nosebleed heights, and as a result all the local governments reckoned tax revenues would skyrocket every year like clockwork and all the developers building tens of thousands of over-priced rental units also assumed the trend would continue forever.
Too bad they didn't read Laozi and learn that The Way of the Tao Is Reversal: whether you call it the Tao or merely reversion to the mean, demanding $3,000 a month for cramped apartments and $1 million for decaying bungalows were extremes that begged for a reversal.
The federal unemployment payments and bailouts make it easier to extend the delusion and denial for a few more months, but eventually the gravity of reality will overpower magical thinking and everyone counting on overvalued assets and overpriced rent, healthcare, childcare, college tuition, etc. remaining at pre-pandemic levels will have to start dealing with deep, permanent declines in sales, employment, income, asset valuations, tax revenues, etc.
The higher the costs and taxes, the greater the sacrifices that will be needed to slash and burn budgets and spending. For high-cost, high-tax urban areas, it's unlikely the political leadership will be able to force such sacrifices on self-serving insiders and government clerisies. The only real force for evolution / adaptation will be collapse and bankruptcy, which are already baked in as the end-game for every high-cost, high-tax urban region.
The Axis of Easy Triumvirate (Mark, Jesse and I) discuss opting out of urban decay in our new salon / podcast: Will "The Great Opt-Out" be able to scale? As Jesse noted, a necessary part of the solution is to make robust broadband Internet connections a predictable feature of rural living, as reliable bandwidth is a necessity for those working remotely in rural areas-- an attractive opt-out option I've covered for years: Degrowth Solutions: Half-Farmer, Half-X (July 19, 2014), in which X is remote online work.
Lacking any rooted family place to return to, Americans will have to do what they do best when there's no other option: re-invent themselves, and in pursuing this, they will re-invent small town and rural living as a by-product of opting out of what's no longer affordable or bearable.
In my view, the author who best understood the American process of re-invention is Herman Melville. Though famous for his sprawling novel of the sea and whaling, Moby-Dick, my favorite novel of Melville's is his under-appreciated classic, The Confidence-Man, a book I discussed in Do We Actually Want To Be Conned? All Too Often: Yes (September 3, 2008).
Every con depends on trust, and as trust and confidence are lost, cons become more difficult. Part of the process of re-invention is to find places, people and processes you can trust because they continually demonstrate their authenticity via transparency, accountability, reliability and honesty.
Virtually nothing in America's top-down financial and political realms is actually transparent, accountable, authentic or honest. Everything in these realms is a simulated, completely self-serving projection intended to fool us--The Big Con.
In re-inventing themselves via opting out, Americans will have to learn to contribute productively to small, localized beach-heads of trust, transparency and accountability that function on the local level in an anti-fragile fashion, meaning that they actually improve and get stronger as the top-down Big Con collapses under the weight of its own lies, frauds and corruption.
The Savior State's promises to maintain your private status quo regardless of reality are false promises, delusions based on the Big Con that we can create trillions of dollars out of thin air and give them to the top .01%, and this will magically prompt an unsustainable system to keep issuing false signals of stability.
The promises are on permanent back-order, along with trust, transparency and accountability. The choice isn't whether to opt out or continue hoping delusions and denial will work some sort of magic, but to choose whatever form of opting out works best for you and your household.
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


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Thursday, May 21, 2020

The Pandemic Gives Us Permission To Get What We Always Wanted

Dear Corporate America: maybe you remember the old Johnny Paycheck tune? Let me refresh your memory: take this job and shove it.
Put yourself in the shoes of a single parent waiting tables in a working-class cafe with lousy tips, a worker stuck with high rent and a soul-deadening commute--one of the tens of millions of America's working poor who have seen their wages stagnate and their income becoming increasingly precarious / uncertain while the cost of living has soared.
Unemployment and the federal stimulus bonus of $600 a week are far more than your regular wages, including tips. Exactly why do you want to go back to your miserable job and low pay? Why wouldn't you take time off and enjoy life a little, which is what you've been wanting to do for years?
Indeed--why not? The pandemic is giving many permission to get what they always wanted. Consider these examples:
1. The Federal Reserve has always pined for the power to bail out the top .01% / the New Nobility the way they deserve, with unlimited money-printing and the Fed being able to buy every rigged, fraudulent asset spewed by the New Nobility's financial and corporate predators and parasites.
Yee-haw, the pandemic genie granted your wish: there's no limits on how many trillions you can shove into the greedy maw of the top .01%, and bail out every single one of their predatory, exploitive, legalized looting bets that went south.
2. Local officials always wanted to commandeer some motels and shove the homeless into them, to clear the sidewalks and parks and then claim "homeless problem solved." Presto, your wish has been granted.
3. Central government authorities have always resented all those pesky civil liberties restraints on their unquenchable desires to control every tiny aspect of life, public and private, and now--voila, the doors to Petty Authoritarian Heaven have opened. Question our authority? A tenner in the gulag for you, Doubter of All That Is Great and Good.
4. Restaurant owners who on camera always have to say how much they love their customers and business, never mind the money, who secretly have come to loathe their over-entitled, self-absorbed, dilettante customers and are sick and tired of the soaring rent, business licenses, insurance, payroll taxes and costs of ingredients.
You know what, pal? Here's the keys, you can re-open whatever the heck you want, I'm outta here. I've been secretly wishing I could get out from underneath this crushing burden and get my life back. Yes, it was exciting way back when, but now it's nothing but an endless grind that wasn't making money even before the pandemic.
5. Since the financiers, Big Tech mini-gods and stock buyback crowd have looted and pillaged their way to immense fortunes by lying, cheating, conniving and gaming, why not follow the money just like the predators and parasites at the top of the heap?
Indeed, why not fudge the application for a federal small business loan and use the "free money" to lease that shiny new Rolls Royce you always desired? Well, haven't the authorities been begging us to borrow and spend like there's no tomorrow?
6. Dear Corporate America: maybe you remember the old Johnny Paycheck tune? Let me refresh your memory: take this job and shove it, I ain't working here no more. If there's a will, there's a way, and I'm stepping off the rat race merry-go-round, thank you very much. You can find some other sucker to do your dirty work and BS work, all for the greater glory and wealth of your New Nobility shareholders. I'm outta here. So I won't get rich, that dream died a long time ago. What I'm interested in now is getting my life back.
The pandemic might not follow the Central Casting script of a V-shaped return to debt-serf, BS-work wonderfulness. Everyone who was sick and tired of their pre-pandemic life and the endless exploitation has had time to think things over, and some consequential percentage of them will welcome "good-bye to all that" and others will decide not to go back, even if that is still an option.
It's called opting out, and it has always characterized the end of imperial pretensions, pillaging, propaganda and predation. Financial parasites, beware the second-order effects of your overweening dominance and limitless greed.
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


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Wednesday, May 20, 2020

This Sucker's Going Down: The Destruction of Demand

Demand based on debt, unfulfilled promises and unaffordable habits is burning down.
The first-order effect of the lockdown was demand destruction as shelter-in-place orders and business closures restricted consumers' ability to spend.
The second-order effect will be the permanent destruction of demand because people will realize they're better off reducing their consumption of high-cost, questionable-value goods and services. Let's start with the resurgence of savings, the most basic form of security you actually control and the most basic form of hedging against promises of a return to wonderfulness failing to arrive in the real world.
Comically, security you actually control, i.e. savings, are viewed by the status quo as a mortal threat to the economy: how dare you keep some of your own money rather than squander all of it! Notice how this bit of twisted CNN humor labels savings "hoarding," as if retaining a bit of your hard-earned wages is evil "hoarding" rather than prudent self-sufficiency.
For those who weren't alive to experience the 1980s, it was a boom era of widespread prosperity. In a functional economy, savings are understood as one of the foundations of prosperity. In today's insanely dysfunctional neofeudal economy, savings are a despicable evil because they take the bread right out of the bankers' and corporate elites' mouths. How dare you rob poor Jamie Dimon and Jeff Bezos with your awful, horrible, cruel savings of money that you actually control, money that protects you and gives you some security!
In other words: how dare you serve your own needs and interests rather than our monomaniacal obsession with increasing our profits at your expense.
Another second-order source of demand destruction is people realizing they don't actually need as much XYZ as they once thought. This covers quite a range of services, from tourism to dining out to attending absurdly costly sporting events and concerts to all the video subscription services people pay for but rarely use.
Demand destruction won't be limited to the periphery. It will also shred big-ticket sectors such as healthcare and higher education. One of the key dynamics in demand for these crazy-expensive services is rarely addressed: the more higher education you "consume," the greater the pressure to get even more higher education. This also holds true for healthcare: the more you "consume," the greater the pressure to consume even more healthcare.
Correspondent AP (Anonymous Physician) delineates the sources of demand for healthcare:
An under appreciated challenge going forward is the destruction of healthcare demand.
The demand for healthcare was generated by three factors, in decreasing order of importance.
1. "Self-Generation" i.e. when healthcare was received, it led to more healthcare being demanded. Healthcare is pretty unusual as a good/service in that it generates its own demand.
2. Marketing. Except for a tiny sliver of high-margin procedures, healthcare is a loss-leader for health systems. The profitable revenues come from foot traffic, commercial real estate 'appreciation,' and the sales of personal information.
3. Actual, proven, demonstrably beneficial need. (By far the last).
The 'Casino' model of healthcare is driven by this dynamic: tight-margins/high cashflows lead to overbuilding, which leads to more of #s1 and 2 above, which leads to more cashflow, and so the cycle repeats.
People are discovering:
1. The delivery of healthcare entails real risk--even if theyĆ¢€™ve mis-apportioned it to COVID-19.
2. They're doing alright without getting it.
3. Since they aren't getting it, they're getting less of it. (See #1 above).
We're already seeing healthcare corporations whining about a drop in income as "consumption" of "elective surgeries" is not bouncing back to pre-pandemic levels, and people are cancelling their "excuse to bill Medicare or Medicaid" "follow-up" appointments.
The people working in this broken, perverse-incentives system didn't choose it, they're trapped in it. The same can be said of every dysfunctional, sclerotic, ridiculously costly system in the U.S. Reform is impossible, given the incentives, regulations and vested interests whose sole purpose is to, in Clay Shirky's insightful phrase, "preserve the problem to which they are the solution."
Here's my summary of the sources of demand for higher education:
1. The higher your level of credentialed attainment, the greater the pressure to get another degree.
2. Marketing: the claim that a college diploma is the one essential passport to secure high-paying careers and therefore worth any price and any sacrifice.
3. Actual learning: near zero on the demand scale.
You know the multi-level marketing of higher education: gee, too bad your Bachelors Diploma turned out to be worthless. The solution is to spend another $100,000 on a Masters Degree.
Dang, too bad about the glut of other job seekers with Masters Degrees. The solution is to invest another 4 or 5 years and another $100,000 (in deferred income if nothing else) on a PhD or professional degree (MBA, etc.)
Shucks, there's a global glut of folks with PhDs and professional degrees? Well then you'll have to get a second professional degree.... and so on. There's no end to the number of credentials one can acquire, and the hope is just one more will do the trick and the over-credentialed student will escape the black hole of a global glut of over-credentialed job seekers.
Then there's the implosion of demand for commercial real estate and $1 million decaying bungalows. Why blow hundreds of thousands of dollars on design services and renovations if the asset is losing value no matter how much money you pour into it?
Once people were forced out of their manic rut of buy, buy, buy in search of deranging distraction, they've realized they're better off without the expense, the mania and the derangement. The media is cheerleading the crowds jamming into bars, but I suspect a consequential number of those "consumers" will find the things they so longed to resume doing aren't as fulfilling as they'd expected.
A consequential number of consumers may be questioning the viability and benefits of blowing hundreds of dollars to attend a sporting event. Maybe the $12 cup of beer and the $12 hot dog at the ballpark are no longer worth it.
A consequential number of consumers may be realizing they can no longer afford the splurges they indulged in so regularly, of if they can afford it, they no longer want to trade away savings for mindless indulgences.
There are competing models for healthcare and higher education that cost mere fractions of the systems now imploding due to demand destruction. I outlined a campus-free apprenticeship model of higher education in my 2012 book The Nearly Free University and the Emerging Economy, that lays out an alternative way to credential actual learning: accredit the student, not the institution. (This goes hand-in-hand with my other principle, accredit yourself.)
Demand based on debt, unfulfilled promises, over-regulation and unaffordable habits is burning down. Scapegoating savings is the last desperate propaganda ploy of an exploitive system that was never sustainable.
My COVID-19 Pandemic Posts


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Monday, May 18, 2020

Our Fate Is Sealed, Vaccines Won't Matter: Four Long Cycles Align

A Covid-19 vaccine, or lack thereof, will have zero effect in terms of reversing these cycles. Call it Fate, call it karma, call it what you will, but the cycles have aligned and nothing can stop the unraveling of all that was foolishly presumed to be permanent.
We like to think we're in charge and that technology conquers all, but history moves in cycles that are larger than any person, corporation, elite or (gasp) technology. My first version of the chart below was drawn in 2008, when the Global Financial Meltdown revealed the cracks in the happy-story facade of permanent wonderfulness based on the amazing magic of borrowing / printing ever greater sums of currency, a.k.a. "money."
Longtime correspondent Cheryl A. suggested I revisit the alignment of long-wave cycles, and so let's start by what the study of cycles is not: it is predictive in terms of trends and turning points, not precise time or amplitude targets. In effect, the study of cycles is the study of human nature as it plays out in long-term social, political and economic dynamics.
Sir John Glubb's succinct and deeply informed 1978 essay The Fate of Empires lists these stages of social development and decay that manifest as the rise and decline of empires:
The Age of Pioneers (outburst or Boost Phase)
The Age of Conquests
The Age of Commerce
The Age of Affluence
The Age of Intellect
The Age of Decadence
The slippery slope to collapse--decadence--is characterized by greed, corruption, irreconcilable internal political rifts, moral decay, frivolity, materialism--hmm, sound familiar?
The global status quo sped through The Age of Intellect (postmodernism) with little to show for the vast expenditure of resources, and is now firmly in the final terminal stage of decadence and collapse.
All of this fits the S-Curve model which I've described here many times, for example:
As I discussed a few months ago in The Taxonomy of Collapse (December 9, 2019), any number of events or trend reversals can trigger the rapid decline and collapse of what was widely viewed as permanent.
The book The Fate of Rome: Climate, Disease, and the End of an Empire makes a compelling case that the Western Roman Empire centered around the Mediterranean suffered from a slow environmental transition from an unusually wet era that enabled grain to be grown in previously marginal areas to a drier era that no longer supported the immense grain harvests needed to feed the empire.
The imperial machinery accustomed to there's always more somewhere refuses to trim its expenses, elites refuse to lessen their skim, and since the fat of elite excess is retained, eventually the muscle of military power and trade decay, leaving a hollowed out empire on the edge of a precipice awaiting one final kick into the abyss.
The Covid-19 pandemic is the final kick into the abyss. Triggers of collapse can overlap, of course, accelerating the final decline, and hence our interest in long-wave cycles that align in the present era.
All complex, tightly bound systems are intrinsically fragile and prone to disruption; we don't see the fragility or vulnerabilities until the decline has reached the terminal phase.
The higher up the wealth-power pyramid the observer is, the more prone they are to a magical-thinking belief that the status quo is forever, even as it is crumbling around them. I discussed this earlier this month in Our Inevitable Collapse: We Can't Save a Fragile Economy With Bailouts That Increase Fragility (May 1, 2020).
Let's consider the four overlapping/aligning cycles depicted on this chart. I could have added more, for example Glubb's cycle of imperial expansion and decline, or Peter Turchin's cycle of social integration and disintegration which he explained in his 2016 book Ages of Discord: human history manifests cycles of social disintegration and integration in which the impulse to cooperate in large social structures waxes and wanes.
Turchin identified 25-year cycles that combine into roughly 50-year cycles, comparable (though not identical with) Kondratieff's economic cycles.
These 50-year cycles are part of longer 150 to 200-year cycles that move from cooperation through an age of discord and disintegration to a new era of cooperation.
These long cycles parallel the cyclical analysis of David Hackett Fischer, whose masterwork The Great Wave: Price Revolutions and the Rhythm of History I've referenced many times over the years, most recently in We've Entered an Era of Rising Instability and Uncertainty (July 18, 2016).
Turchin's model identifies three primary forces in these cycles:
1. An over-supply of labor that suppresses real (inflation-adjusted) wages
2. An overproduction of parasitic Elites
3. A deterioration in central state finances (over-indebtedness, decline in tax revenues, increase in state dependents, fiscal burdens of war, etc.)
These combine to influence the social order, which is characterized in eras of discord by declining loyalty to self-serving special interests (disintegration).
The four cycles depicted are:
1. The cycle of credit expansion and contraction, which is now in the final blow-off stage of unsustainable credit expansion (bubble) which will inevitably lead to renunciation of debt (credit collapse) and global depression.
2. The generational cycle (4 generations or approximately 80 years) of American history which leads to nation-changing social, political and economic upheaval (The American Revolution: 1781 +80 years = Civil War, 1861 +80 years = 1941, World War II + 80 years = 2021) as described in the book The Fourth Turning.
3. The 100+ year cycle of price inflation and stagnation of wages' purchasing-power which began around 1901 is now reaching the final stage of widespread turmoil, shortages, famine, conflict and crisis. (This can be viewed as aligned with Turchin's cycle of social disorder and disintegration.)
4. The demographic cycle: the workforce stops expanding and starts shrinking while the population of dependent elderly explodes higher, triggering a decline in earnings and the tax base just as taxes must increase to pay for the care of the rising population of elderly. (This is one dynamic in Turchin's deterioration in central state finances.)
All of these cycles aligned around the Global Financial Meltdown of 2008-09, and elites have done nothing but kick the can down the road for over a decade in an ad-hoc explosion of TINA (there is no alternative). Nothing that's broken has been fixed; all that's been done is trillions in currency has been borrowed or printed to paper over the dissolution, decay and decline.
-- The demographic cycle has only accelerated.
-- The expansion of credit has now reached extremes no one thought possible, much less necessary, just 15 years ago.
-- The generational cycle is playing out perfectly, with Trump, Brexit, Yellow Vests, etc. all erupting a few years before the terminal crisis begins in 2021.
-- Asset inflation has exploded higher since the late 1990s in one asset class after another until now it's the Everything Bubble. Despite official claims of low inflation, the costs of healthcare, childcare, higher education, rent and other essentials has skyrocketed in the past decade, and the cost of tradable goods is now beginning to accelerate as globalization and financialization unravel long supply chains and zombie corporations.
Resource depletion and geopolitical conflicts could create scarcities that the status quo has long dismissed as "impossible"--scarcities that could push prices for necessities through the roof.
The future won't be as placid, secure and predictable as the status quo would have you believe. A Covid-19 vaccine, or lack thereof, will have zero effect in terms of reversing these cycles. Call it Fate, call it karma, call it what you will, but the cycles have aligned and nothing can stop the unraveling of all that was foolishly presumed to be permanent.
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


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