How Do We Make America Strong Again? Start Telling the Truth

You want to make America strong again? The only way to do so is to start telling the truth and insisting on the truth.

"Making America Strong Again" is a potent political narrative. But what does "being strong" mean? For some, it's a code-phrase for bullying--forcing other nations to do our bidding.

For others, it describes a re-emergence of widespread domestic economic vitality.

Another audience sees the rebuilding of a social contract and social cohesion as the essence of strength.

As laudable as some of these interpretations of strength might be, to me "being strong" boils down to one principle, and only one principle: tell the truth, however painful and unwelcome as it might be. The essence of weakness is the cowardice of avoiding the truth. We as a nation have grown accustomed to the cowardice of half-truths, half-confessions, half-apologies and a financial system that rewards fraud in all its variations of artifice, deception and lies.

What's presented as "fact" is actually a spectrum of manipulation and lies.Does anyone with a basic grasp of the economy really believe unemployment is 5% or less? Does anyone seeking the truth believe that a person working one hour a week is equivalent to someone working 40 hours a week? Isn't counting both of these positions as equally statistically important jobs a form of not telling the truth?

If you hold great wealth and power, and the source of your wealth and power is illegitimate, you must dissemble, fabricate, propagandize and lie to hide the illegitimacy of your power. That is the status quo of the U.S. in a nutshell. Those who earned wealth and gained power legitimately have no fear of the truth. Those whose wealth and power is illegitimate fear the truth more than anything else.

The Power Elite of the nation has purposefully co-joined "America" and "Empire," as if the two cannot be separated. They have successfully conned much of the public into a strained belief that the U.S. isn't an Imperial Project, that we're just looking out for our "interests," which just happen to extend into every nook and cranny of the entire planet.

The Power Elite has also purposefully confused bullying with strength. Bullying fails because the bullied hate the bully with every fiber of their being. True strength flows from opt-in, mutually beneficial alliances that people and nations join out of self-interest. Such opt-in relationships can only endure if telling the truth is the core principle, for truth is the foundation of trust, and trust is the foundation of durable alliances and cooperative networks.

The Power Elite of the nation has pushed the narrative that its own rising power reflects the rising power of the nation. Nothing could be further from the truth.The increasing concentration of wealth and power in the hands of the few at the expense of the many is the source of America's weakness, vulnerability and fragmentation.

Take a look at this chart. While GDP per person (per capita) has been rising, household income has been declining. What does that tell us about the economic growth we keep hearing about? That it's flowing to the top and being drained from the bottom 80%.

Telling the truth, and insisting on the truth, requires courage, a moral foundation and strength. Telling lies, accepting half-truths and living with fraud as a way of life is easy because it requires no courage, moral foundation or strength.

You want to make America strong again? The only way to do so is to start telling the truth and insisting on the truth. Accepting statistical lies, propaganda and fraud as "truth" because it's easy and doesn't challenge our assumptions is a one-way road to ruin.

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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If We Can't Be Honest, No Solution Is Possible

Dishonesty wasn't really a solution, it was simply easier.

Scale-invariant refers to a dynamic that functions equally well on the micro-level as it does on the macro-level. (The scientific definition is:"scale invariance is a feature of objects or laws that do not change if scales of length, energy, or other variables, are multiplied by a common factor.")

Accounting is scale-invariant. If a household has fewer assets than liabilities, it is insolvent. If a $10 billion company has fewer assets than liabilities, it is insolvent.

Human emotions also have scale-invariant features, as we all share the same wetware / genetic heritage / naturally selected default settings and capabilities.

The notion that the ideal solution to a problem is to hide it by ignoring it and refusing to discuss it is scale-invariant. "The elephant in the room" in a marriage is a problem that one or both partners fear might blow up the relationship, and neither is willing to take that risk.

In a corporation (for example, in Nokia before it collapsed), mid-level managers hide problems for fear of being fired or demoted.

In national governments and central banks, major financial/ economic problems are glossed over with soothing public relations and rigged statistics.

We all know this "solution" (hiding a problem and refusing to acknowledge it directly) eventually blows up the relationship, the corporation or the national economy.

Dishonesty wasn't really a solution, it was simply easier: directly acknowledging a serious problem is difficult for many reasons. Nobody likes to acknowledge failure and/or powerlessness, and nobody likes to sacrifice or ask others to sacrifice.

So we ignore the problem, gloss it over, mask it, and refuse to honestly confront the unwelcome realities.

Kyle Bass has consistently maintained that China's ballooning debt has reached the point that the government, despite its claims to the contrary, can no longer control the inevitable implosion of China's $3 trillion in corporate debt and trillions in other private-sector debt.

In comparing the asset-liability mismatch that triggered the collapse of the U.S. housing bubble in 2008 with China's current mismatch, Bass said:

"...our asset-liability mismatches were two and a half percent of our system, and you know what they did. So China's excesses (at 10% of their system) are already, they're already so far ahead of the world's excesses in prior crises that we're facing the largest macro imbalance in world history. And to this day, I can't figure out why people don't see it for what it is."

If we can't be honest, no solution is possible.

Many of us declared the official response to the Global Financial Meltdown of 2008-09 nothing but smoke and mirrors and extend and pretend.

Interestingly, after seven years of weak growth and rising wealth/income inequality,the mainstream media is finally discussing the reality that the official "fixes" of quantitative easing (QE) and zero-interest rate policy (ZIRP) have not been solutions at all: they've only exacerbated imbalances and inequalities that have grown in size and severity.

Putting off the day of reckoning is not a real solution.  Solutions require honesty, and currently that honesty is too painful to bear.

So instead of getting an opportunity to think through a long-term solution, we'll get another meltdown (this time in China) and the authorities will choose politically expedient "extend and pretend" fixes that only make the underlying imbalances and instabilities worse.

Denial is not a solution, and neither is acting like the problem doesn't exist. But this is our short-term default setting in all scales of human life.

There is a high price to be paid for not solving problems, just as there is a great dividend for those few who have learned to tackle problems head-on in a brutally honest fashion.

This essay was drawn from Musings Report 27. The weekly Musings Reports are emailed exclusively to subscribers and major contributors ($5/month or $50 annually).

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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

Thank you, Frankie M. ($50), for your stupendously generous contribution to this site-- I am greatly honored by your support and readership.

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Could This Rally Be a Head-Fake?

If there's nothing supporting this rally but euphoric sentiment arising from orchestrated buying, any eruption of reality will reveal the rally as a head-fake.

Let's say you wanted to engineer a stock market rally that triggered every technical "buy" signal and wiped out those who are short the market--what would you do? First, you'd engineer a new all-time high to signal "all clear for further advances."

Then you'd crush volatility as measured by the VIX, signaling that there is nothing standing in the way of more advances.

Next, you'd engineer new highs every day for a week or more.

To do this, you'd unleash a wave of strong buying at every bit of "good news," no matter how jury-rigged, to trigger computer-trading buying: bogus earnings "beats," any M&A activity, rumors of more stimulus in Japan, a pop up in crude oil, etc.--whatever could be construed as even modestly good news.

This entire rally has an engineered feel. All the technical "buy" signals are precisely what you'd expect in a rigged rally.

The rally's strength is reminiscent of the 1999-2000 Internet-era stock market, but compare the fundamental backdrop of then and now. Back then, earnings, sales, profits and employment were all up strongly globally, and China and the emerging markets were experiencing trade-based organic (i.e. not the result of central bank stimulus) expansion.

Can the same be said of the present? No. Employment is stagnant once low-paying part-time jobs are stripped out of official cheerleading statistics, and corporate profits are sliding--especially if "one-time charges" and other accounting trickery are stripped out.

As for global trade--it's stagnant or down. Whatever "growth" is officially reported is either suspect or based on unsustainable expansion of private credit or central bank/state stimulus. Consider the following chart: three major economies out of five are already experiencing declining private credit, and China's rocket-like trajectory is clearly unsustainable:

The list of global financial weaknesses and potential crises is long and varied. 2016 is not 1999.

If there's nothing supporting this rally but euphoric sentiment arising from orchestrated buying, any eruption of reality will reveal the rally as a head-fake:having exterminated short-sellers, there won't be many who will benefit should the rally be transformed into a rout by reality.

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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

Thank you, Paul C. ($200), for your outrageously generous contribution to this site-- I am greatly honored by your steadfast support and readership.

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Globalization's Few Winners and Many Losers

Quality, quality of life, and well-being are not easily quantified, so they are ignored.

I often write about the Tyranny of Price, the rarely examined assumption that lower prices are all that matters.

Thanks to the Tyranny of Price, the quality of many goods has plummeted.Obsolescence is either planned or the result of inferior components that fail, crippling the entire product. As correspondent Mark G. has observed, the poor quality we now accept as a global standard wasn't available at any price in the 1960s-- such poor quality goods were simply not manufactured and sold.

There is another even more pernicious consequence of the Tyranny of Price: globalization, which makes two promises to participants: 1) lower prices everywhere and 2) manufacturing work that will raise millions of poor people in developing economies out of poverty.

Globalization is presented as a win-win solution: the developed countries get cheaper goods and the developing world get the benefits of industrialization.

But now a new study, Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies, finds that globalization has been a bad deal for 80% of the people in developed economies, as their income and wealth has stagnated or declined.

A Cheerleader for Globalization Has Second Thoughts: A new study from the McKinsey Global Institute finds that changes in the world economy have left many people worse off..

The McKinsey report focuses on the 540 million residents of developed nations who have lost ground in the era of globalization. But if we look at the terrible pollution in China, we find that rapid industrialization hasn't been as win-win for developing nations as advertised.

The mainstream cheerleaders of globalization have been forced to accept that globalization exacerbates wealth/income inequalities by boosting the rewards for the 20% who benefit from global markets and capital-friendly central bank policies (zero interest rates and quantitative easing) that have pushed asset valuations to incredible bubble heights around the world.

Domestically, the American ruling class and the mainstream punditry are struggling to square the circle, that is, defend the globalization of the U.S. economy that has greatly enriched corporations, the wealthy and the top 5% of the work force but also alleviate the stagnation in the incomes and wealth of the bottom 80%.

Correspondent Graham R. summed up the situation very succinctly in a recent email:

"Focusing on the minimum wage is a false flag. The society as a whole is now stressed at every level because Globalism has promised us cheaper prices at the cost of destroying societal structures and their meaning for its members."

Graham identifies a key consequence of globalization that the mainstream media has ignored: the erosion of social/economic structures that supported communities and provided purpose, meaning and stability to their residents.

When price is all that matters, factories and offices are closed overnight and the work is shipped elsewhere. When production costs go up, the production is moved to another locale.

In this environment, employees are competing with workers globally, which suppresses wages everywhere. Since global corporations have gained political power in globalization, they can buy lobbying and political influence that raises the cost of commerce for small businesses--a process known as regulatory capture that erects walls that stifle competition.

Regulatory capture is the inevitable result of globalization's rewarding of capital and erosion of labor.

Price is not the sole absolute good. Price is only one kind of information. Since price is easily quantified and converted into any currency, it has achieved total dominance in markets and mindspace. Quality, quality of life, and well-being are not easily quantified, so they are ignored. Stagnation, insecurity and a loss of social cohesion are the inevitable result once price is all that counts.


This essay was drawn from Musings Report 29. The weekly Musings Reports are emailed exclusively to subscribers and major contributors ($5/month or $50 annually).

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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

Thank you, G. Wayne A. ($20), for yet another superbly generous contribution to this site-- I am greatly honored by your steadfast support and readership.

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We've Entered an Era of Rising Instability and Uncertainty

And there you have our future, visible in the 13th, 16th and 18th century price-revolution waves which preceded ours.

That we have entered an era of rising instability and uncertainty is self-evident.There will always be areas of instability in any era, but instability and uncertainty are now the norm globally.

There is a template for global instability, one that has been repeated throughout history. Historian David Hackett Fischer described the dynamics that generate periods of rising instability in his book The Great Wave: Price Revolutions and the Rhythm of History (sent to me a number of years ago by correspondent Cheryl A.)

In Fischer's well-documented view, there is a grand cycle of prices and wages which turn on the simple but profound law of supply and demand; all else is detail.

As a people prosper and multiply, the demand for goods like food and energy outstrips supply, causing eras of rising prices. Long periods of stable prices (supply increases along with demand) beget rising wages and widespread prosperity. Once population and financial demand outstrip supply of food and energy--a situation often triggered by a series of catastrophically poor harvests--then the stability decays into instability as shortages develop and prices spike.

These junctures of great poverty, insecurity and unrest set the stage for wars, revolutions and pandemics.

It is remarkable that the very conditions so troubling us now were also present in the price rises of the 13th, 16th and 18th centuries. Unfortunately, those cycles did not have Disney endings: the turmoil of the 13th century brought war and a series of plagues which killed 40% of Europe's population; the 16th century's era of rising prices tilled fertile ground for war, and the 18th century's violent revolutions and resultant wars can be traced directly to the unrest caused by spiking prices.

(The very day that prices for bread reached their peak in Paris, an angry mob tore down the Bastille prison, launching the French Revolution.)

After a gloriously long run of stable prices in the 19th century--prices were essentially unchanged in Britain between 1820 and 1900--The 20th century was one of steadily increasing prices. Fischer takes great pains to demolish the ideologically appealing notion that all inflation is monetary; the supply of money (gold and silver) rose spectacularly in the 19th century but prices barely budged. In a similar fashion, eras of rising prices have seen stable money supplies.

Monetary inflation can lead to hyper-inflation, of course, but there are always mitigating factors in those circumstances. The long wave is not one of hyper-inflation but of supply and demand imbalances undoing the social order.

Americans are inherently suspicious of anything which seems to threaten constraint of the American Dream; thus it is not surprising that cycles of history are largely unknown in the U.S. As Fischer explains:

This collective amnesia is partly the consequence of an attitude widely shared among decision-makers in America, that history is more or less irrelevant to the urgent problems before them.

Fischer notes that he describes not cycles but waves, which are more variable and less predictable. (Surfers know to count waves, as they tend to arrive in sets.)

In response to this great rise in prices of essentials, both commoners and governments debased the currency. In their day, this meant shaving the edges of coins, or debasing new coins with non-precious metals. The debasement was an attempt to increase money to counteract the rise in prices, but it failed (of course). Every few decades, a new undebased coinage was released, and then the cycle of debasement began anew.

Just as insidiously, wages fell:

But as inflation continued in the mid-13th century, money wages began to lag behind. By the late 13th and early 14th centuries real wages were dropping at a rapid rate.

This growing gap between returns to labor and capital was typical of price-revolutions in modern history. So also was its social result: a rapid growth of inequality that appeared in the late stages of every long inflation.

And what happened to government expenditures? It's deja vu all over again--deficits:

Yet another set of cultural responses to inflation created disparities of a different kind: fiscal imbalances between public income and expenditures. Governments fell deep into debt during the middle and later years of the 13th century.

Oh, and crime and illegitimacy also rose. Fischer summarizes the end-game of the price-rise wave thusly:

In the late 13th century, the medieval price-revolution entered another stage, marked by growing instability. Prices rose and fell in wild swings of increasing amplitude. Inequality increased at a rapid rate. Public deficits surged ever higher. The economy of Western Europe became dangerously vulnerable to stresses it might have managed more easily in other eras.

And there you have our future, visible in the 13th, 16th and 18th century price-revolution waves which preceded ours. It is hubris in the extreme to think we have somehow morphed into some new kind of humanity far different from those people who tore down the Bastille in a great frustrated rage at prices for energy and bread they could no longer afford.

It is foolish to blame "speculators" for the rise in food and energy, when the human population has doubled in 40 years and the consumption of energy and food has exploded as a result.

So where does this leave us? Based on the history so painstakingly assembled by Fischer, we can anticipate:

Ever higher prices for what I call the FEW Essentials: food, energy and water.

Ever larger government deficits which end in bankruptcy/repudiation of debts/new issue of currency.

Rising property/violent crime and illegitimacy.

Rising interest rates (currently considered "impossible").

Rising income inequality in favor of capital over labor.

Continued debasement of the currency.

Rising volatility of prices.

Rising political unrest and turmoil (see "Revolution").

With this in hand, we can practically write the headlines for 2017-2025 in advance.


My apologies to correspondents: due to various family demands, I have zero time to respond to email, Facebook posts, etc. Thank you for your understanding.

My new book is #19 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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

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

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