AZspot

I have problems with modern, accepted economic theory. It smacks of religion and not science, and that’s a problem for decision making. Some of my gripes: It has failed to deliver predictive results, as we saw with the financial meltdown. Worse, it has problems explaining historical results: It can’t explain why western economies haven’t delivered any improvements to middle class incomes in three decades, despite rapidly rising productivity and growing GDP. It can’t explain the rise of Wall Street, the ongoing rush of assets bubbles, and our current ziggurat of debt. It can’t even explain why “free trade” works, for anyone but the low wage provider, in a world where all evidence points to the fact that information technology makes productivity hyper-portable. Some effort to paper over this failure (in prediction) has been undertaken by followers of the Austrian school of economics, but that explanation is too narrow (it merely describes why the financial pneumonia killed you and not the economic AIDS that made you vulnerable). John Robb ☀

I start with the view that a suburban town is a community and not just type of architecture. People/families live their lives in these towns. So, as a community, it’s ability to survive/thrive is a function of its adaptability. If the future is going to be as tough as we think it is, then the question of suburbia really becomes: are suburban communities adaptable enough to thrive in the future (as in: becoming resilient communities). Given the advantages of the suburban landscape (land, surface area, security, etc.) has over rural/urban in many revival scenarios (post crunch), the only existential threat to these communities appears to be the from the global financial system — aka a foreclosure tsunami that decimates communities faster than they can reconfigure/change. I think that problem is solvable. John Robb ☀

Globalization is in the process of eviscerating traditional loyalties.  In the 20th Century, loyalty to the nation-state (nationalism, often interwoven with ideology), was supreme.  In today’s environment, a global marketplace is now the supreme power over the land.  It has drained the power of nation-states to control their finances, borders, people, etc.  Traditional ideologies and political solutions are in disarray as the fluctuating and often conflicting needs of the global marketplace override all other concerns.  As a result, nation-states are finding it increasingly impossible to govern and the political goods they can deliver are being depleted.    John Robb ☀

We live in an age where wealth and influence is growing ever more concentrated and thereby increasingly unjust/unstable, while the ability to do everything, from making war to building things to mass communications, can now (or soon will) be accomplished by nearly anybody with the desire to do so.  From a historical perspective, I’m fairly sure that this is a recipe for a global disaster.   John Robb ☀

Lots of critics, like David Brooks, reflexively attribute Obama’s rapid slide to a push for more government. Not even close. In fact, that’s lazy thinking. The rapidity of the slide is due to the Wall Street bailout. Instead of punishment of the perps, we are getting bonuses. Instead of reform to prevent gambling, we get more of the same (even worse, it is being done with an explicit government backstop). Instead of relief for the middle class we get profiteering as the financial industry extracts everything they can from a tapped populace. Nothing could have eroded trust faster than this. All agenda items after this fiasco are/were forfeit. John Robb ☀

Over the last thirty years, the social compact that divided value produced by productivity improvements between workers and corporate/financial interests broke down. All the value from improvements (they were mighty) in productivity went to corporations/finance. Median incomes stagnated for 30 years and the illusion of growth was produced by the extension of cheap debt. It was also the driver behind the ahistorical rise in the stock market and ultimately the recent financial meltdown. That would be bad enough, but it’s getting worse. Median incomes are now on a downward track to give corporations the ability to return to profitability through increases in productivity (a massive 6.4% rise in the last quarter). John Robb ☀

I’ve always thought that being a doctor should be a calling and not a profit driven exercise. Of course, I am on the outside, but I suspect if the government offered free tuition + stipend and $120 k with a cola for 20 years once you get out of school, the line of highly qualified applicants would go out the door, round the block, and across the country. I wonder if resilient communities could offer this to route around the damage at the national/state level? John Robb ☀

…rentier interests are so overwhelmingly dominant in our society. There’s a couple of interpretations of how this plays out. One is that post industrial government is morphing into a system that exclusively protects and extends the interests of rentiers. Another is that the economic system grinds down, ossifies, rapidly destroying any entrepreneurial spirit. Regardless, it’s not a good sign. Another thing that really bugs me is the idea that most “financial innovation” is truly innovation in the entrepreneurial sense. It is, for the most part, innovations that yield new methods of gambling and predatory behavior (skirting regulation/propriety/morality) rather than innovation that creates net societal benefit. So, any attempt to lump the “risk takers” of Wall Street to the “risk takers” of entrepreneurs making new services/products is an egregious conflation of societal value and pure misdirection. John Robb ☀

It’s been my belief that economic vitality, the ability to generate maximal growth in wealth over long periods of time, is a function of the degree two which ownership over the capacity to produce things is dispersed. The more decentralized ownership over productive assets is, the faster wealth grows. It’s a function of decentralized decision making (something I call, “open decision making”). In our wage driven society, where productive assets are concentrated, we’ve attempt to game this. We’ve focused on distributing the ownership of non-productive assets (homes or the financial equivalent in pensions/retirement savings), instead of productive assets. That approach is proving to be a failure. It is too easily gamed by financial elites, who use debt to assume ownership and corporate ownership to freeze/reduce wages. It also forces economic sclerosis since decision making on how to allocate capital and improve its application is centralized in the hands of a few. John Robb ☀

Unfortunately, it’s almost impossible to fully appreciate the collapse of a system if you are inside it. Like the proverbial turkey being fattened for Thanksgiving, the steady meals and constant verbal assurances from the farmer obscures reality until the very last moment. The moment when the man with knife arrives. John Robb ☀

ZIRP (zero interest rate policy) has arrived in the US. The Federal Reserve and the US Treasury are now in desperate straights to stabilize the US economic system (and by extension, the global economic system). From a systems perspective, it’s also a formal indication that the US and the global economy is now operating far from equilibrium and the Fed/Treasury is using every control input they have to return the system to its previous equilibrium. Unfortunately, from a systems standpoint, that’s VERY unlikely to happen. What will happen is either a monstrous overshoot (overcorrection) or a control system failure that plunges the entire system deeply into turbulence/non-linearity. While the establishment of a new equilibrium point at our current position, where the forces of correction and positive feedback loops are balanced, is possible, it’s also unlikely since there isn’t an external reference environment available to fix the system to. John Robb ☀

Too bad all the benefits of decades of US productivity and economic growth were squandered on the delusional and ideological excesses of the financial capitalists. Imagine what the world would be like to today if incomes grew in line with productivity as per the 50-60’s social contract. Per capita incomes would be twice what they are today and the savings of US citizens would be powering the world economic machine. Further, since the gain would have been broad-based, it’s extremely unlikely the concentrated excesses of Wall Street would have happened at all. John Robb ☀

The US system took tens of trillions out of the pockets of workers for decades (wage/salary increases historically tied to productivity improvements ended in 1974) and shunted them into investments in capital markets. That money is now gone (pixel money that has now gone dark). Fritted away on estates in “the Hamptons” rather than productive investments. Worse, not only has the system “lost” the entire savings of a generation, it has caused a financial and economic crisis that is crushing consumers that have already been stripped to the bone financially. Wealth destruction (stock market, falling home prices, etc.) and a squeeze on wealth creation (falling wages and salaries, unemployment, etc.), catalyzed by predatory lending (particularly in regards to credit cards that are now charging usurious rates with impunity) and bubble-like price inflation in health/education, have driven a large and rapidly growing number of consumers into insolvency. That number will continue to grow. John Robb ☀