It’s easy. Get rid of the regulations that keep the banks from doing insane stuff. It’s easy, and Trump is getting underway with that very action. The process is simple. It’s known as the Minsky Cycle, which is then followed by the Fisher Cycle. The Minsky Cycle describes how things get completely out of hand and, in the middle of a euphoric bacchanal brought on by deregulation and speculation, a moment arrives at which investors panic and the economy collapses. At that point, the Fisher Cycle describes the resulting depression and how it persists in spite of efforts by the government to make things better.
The sad thing is that while those two cycles are some of the most accurate models to emerge from modern economics, they fly in the face of the grand beliefs of the neoliberal economists that believe only free trade and the gold-plated anarchy of deregulation will save the world. Since those neoliberals are also running the world’s major private banks as well as the central banks, they’re always promoting policies to further their ideological views, even when those views always end in tears. Their battle cry is “This time is different!” as they pilot financial machines toward the abyss.
That President Trump has chosen a Goldman Sachs banker for his treasury secretary came as no surprise to me. His speed in junking banking regulations, as well, is no surprise. With markets at all-time highs and debt structures in Europe ready to collapse, the ensuing financial collapse will also be no surprise.
Protip: If you want to make a nation great, keep its banks on a tight leash. Letting them run free never ends well.
Soooooo… what is my opinion of the inequality of wealth, opportunity, and income? I’ll sum it up with a quote: “The Lord will enter into judgment with the ancients of his people and the princes thereof; for ye have eaten up the vineyard and the spoil of the poor in your houses. What mean ye? Ye beat my people to pieces, and grind the faces of the poor.” – The Lord God of Hosts
Capitalism, like communism, is not Christianity. Neither is it, by extension, any other religion outside of its own ideological confines. It does not bring us closer to God. It does not foster virtues. It does not encourage compassionate behaviors. Its most avid practitioners are given over to the love of money, and that is the root of all evil.
I’m restarting my YouTube channel with a discussion of debt. I hope you enjoy it and, if you do, that you will like it, share it, and subscribe to my channel. I’ve got lots of rants in me, and I hit on the right combination for presenting them in a video/podcast manner.
This is my response:
Dear Mr. Hilsenrath,
How are you? I am fine. I hope you are healthy and well. You recently wrote a letter to Americans, which includes me. You said that most of us were stingy and that the economy was depending upon us to be a bit more free with our cash. You also said that I, along with the rest of America, was getting a free ride with zero interest rates. These statements bothered me.
In response to the matter regarding saving, yes, it is true that I have been saving much more of my money than ever before, but that is not to imply that I am socking away the cash for a rainy day. I am saving by paying off debt, which is an odd way of looking at saving for anyone but an economist. However, I used to teach AP Economics, so I get it. I freely admit that I am saving. I will save and save and save some more until I am debt-free.
I want to be debt-free because money, unlike water, flows uphill. Every penny I spend on interest goes to someone wealthier than me. This is the cardinal reason for wealth inequality. People with lots of money lend it out and are supported by my labor in the form of interest payments. Even if I pay off all of my personal debt, I will always be paying interest on corporate debt, as it is rolled into the cost of the goods and services that I purchase. I will never be able to escape debt unless I myself become a lender of sufficient means to make my living off of the labor of others rendering timely interest payments to me.
That is unlikely to happen. Even though Janet Yellen told me to get assets or die tryin’, the fact remains that now is not a good time to start a small business and neither is starting a small business any guarantee of success. In fact, in the oligopolistic structure of most markets, it’s a guarantee of failure. Small businesses simply aren’t getting off the ground like they used to. Markets are increasingly dominated by a small group of players that find it easier to compete against the customer than against each other, with resultant market contortions.
This leads me to the matter of zero interest rates. I have not gotten any money borrowed at zero percent interest, ever, unless it was from my dad. My dad is a great guy. If I can’t make a payment one month, he lets it slide and doesn’t report me to a credit bureau, with consequent disasters implied for my precious credit rating. No, Mr. Hilsenrath, I have always had to pay interest on what I borrowed. I do not know anyone paying zero percent interest on anything other than a car, and that itself is part of a highly rigged gimmick. I do not think that I have gotten a free ride. I do not think anyone in America has gotten a free ride from zero percent interest, unless that person was a corporation powerful enough to qualify for such a rate, and then turn around and use the interest-free borrowings to purchase t-bills or lend it out in consumer credit at higher interest rates.
Now, if you would like to figure out the minds of Americans that aren’t Fed officials, let me help you out. Let’s start with the young.
Kids in school get their money from their parents. If their parents are poor, they’re also poor. Quite a few of them are po’. That means they can’t afford the last two letters, just an apostrophe. Quite a few are even p’. They watch people buying vowels on “Wheel of Fortune” and think to themselves, “One day… one day… I will be able to afford to buy a vowel one day.” Pity those poor, po’, and p’ children.
As for the parents, anyone with a job is poor, at best. That means there is no supply of wealth to tide the family over in hard times. If the job is lost, if there is a dread disease in the family, they are wiped out. Elvis Presley is rich: he continues to earn money from his properties, even though he’s dead. I may have a very well-paying job, but if I were to lose that job, my family’s finances would be dire, indeed.
But let’s consider instead the young person that has just gotten out of high school: that person has a choice to get into the workforce, learn a skill, or go to college. Only one of those paths has a better than average chance of paying off. Ironically, it’s not the college path.
It’s the skill learning path that works for young people. They have to learn to do a job that has to be done here and now, not 12000 miles away at midnight. I have a good friend who is learning computer programming skills in a class full of accountants, engineers, and other people with professional degrees. These are not failed baristas and beauty school dropouts: these are guys that went after the degrees with loads of math and science and then found out that they simply can’t get a job.
My own daughter had three years of college and then realized it wasn’t going to get her anywhere. She dropped out, learned how to do CAD work, and now has a job that pays more than the average salary for a recent college graduate. She has no degree, but has a job that is above the US median wage.
My son is getting ready to join the labor force. He doesn’t want to spend a day in college, and I don’t blame him. It’s a gamble of time and resources that has a poor chance of paying off. Even at a state school with junior college, that’s a proposition that involves borrowing at least $50,000 at non-zero, non-negative interest rates to have a degree that is not a real qualification for any entry-level job. Should he do as I did at the end of my teaching career and invest just a few thousand dollars in IT training, he could have a very well-paying job and be free of personal debt. That is a huge thing.
The sad fact is that most kids will either get an unskilled job, a job with low skill levels, or go to college and then get the unskilled/low-skilled job – if they get a job. U3 unemployment may be low, but have you looked at the U6 number lately? There are an awful lot of people that are still out of work, and they’ve given up to the point where they’re no longer trying to compete for the meager jobs out there.
The Panic of 2008 was more than a big whack to unemployment and 401K programs. It signaled a major structural change in the US economy. Now, the structural change in question had been underway for some time, but The Panic of 2008 removed any doubt in my mind of the irreversibility of the changes.
Globalization of labor markets did not result in rising tides for everyone. Rather, minor wage improvements in developing nations were matched by eliminations of high-paying jobs in the US. The globalization of the labor market meant the end of the days of walking out of college and into a job that typically had nothing to do with one’s major. Those jobs went to college graduates, sure enough, but they were graduates of Indian and Chinese universities, and paid Indian and Chinese wages. This meant that US workers either had to accept wages in those areas or not have a job at all.
The jobs that remained were part-time service jobs. Waiters and waitresses have swelled in numbers as accountants have fallen by the wayside. People living off of $2.15 an hour plus tips are not going to provide for a robust consumer economy.
At least they young have their health, for the most part.
So why did the Great American Consumer not show up to spend money? It’s because he or she has no money to spend. Those waiters are not going to go out to eat all that often, let alone buy a house.
I did not care for the tone you took towards the end, berating the poor for being poor and telling them that they were lucky not to be Greeks or Chinese. Mr. Hilsenrath, we *are* Greeks and Chinese at the end of the day. Our wages are already approaching Chinese limits, and our government is approaching Greek levels of indebtedness.
You speak about raising interest rates as if it was a threat against us, the people of America. A person paying credit card interest doesn’t care much between a change from 23.99% to 24.99%. It’s all the same sort of hopelessness for him. Maybe it triggers another massive round of default on debt, which puts those TBTF institutions into a very failure-prone stance. With a higher interest rate, they can’t be sustained as was the case in the wake of the Panic of 2008. Would we lose jobs in the wake of such a thing, if JP Morgan or Goldman Sachs went belly-up? You bet we would.
The question that should really be dealt with is, “will we lose our temper?” Seeing that the non-violence of Occupy has been replaced by paroxysms of urban rioting, the answer is most likely yes. This makes sense of all the war-drums beating around the world: better to have that rage directed externally than internally.
So, should the world plunge into war, will it be the fault of the American consumer? No, Mr. Hilsenrath, it will not. For the American consumer is, if nothing else, loyal and obedient to his government and its guidance. Whatever the ills of America these days, Mr. Hilsenrath, I assure you that the average American is but a victim and not a general contributor towards. We cannot vote for visionaries to lead us when the lobbyists and major donors only give us puppets that they can control. You say yourself that you listen to Fed officials all the time at the Wall Street Journal: it is because you know full well that the average American is powerless and voiceless, so why bother with him, eh?
A question you should perhaps ask is if the Fed officials ever listen to the WSJ, or is your voice and the voice of your collective colleagues powerless in their view, and therefore beneath their consideration?
Well, long story short, we got no money because it all flowed uphill to the very rich. The very rich don’t spend the way us poor folks do, so that’s why the US economy is poleaxed. It won’t recover unless the very rich decide they don’t need as much profit or return on investment as they’ve gotten in the past. I don’t see that happening, so why not save your lectures for those guys, Mr. Hilsenrath, and then wait and see what it’s like to be completely and utterly ignored.
I’ll be happy to discuss this stuff more, if you would like.
At no point in history does any body of authorities declare that an era has begun, and then the era suddenly begins. Nor does any body of authority declare an end to an era, after which said era dutifully halts. Instead, people look about and around to discover if things are pretty much the same as they used to be or if things are becoming pretty much changed from what they used to be. If things are the same, whatever era one happens to be in is continuing. If things are not the same, then that era is drawing to a close and a new one is beginning. It’s a long process, the change of an era, but it is a noticeable thing, even when one is in the middle of it.
The decline of Rome was absolutely noticeable. Authors of the day recorded how things were changing and how the world of Rome was giving way to something other than the world of Rome: they did not know what to expect. The Aztecs certainly noticed the end of their kingdom and the imposition of Spanish rule as their language and religion were suppressed over time in favor of their conquerors’ ways. The advent of industrialism became noticeable as the cities swelled in size, the factories choked up the air, and people actually began to have aspirations that their own lives would be better in some way than the lives of their parents and that their own children would have material improvements in their lives to make them better than their own.
But now we notice that such things are no longer the case. World population growth is leveling off, and predicted to go into decline before long. No diseases or famines will claim those lives: we’ve simply gotten to where we have access to enough calories per day to support the population we have. Any more is excess. Yes, this does mean that life 300 years ago was a wretched affair as far as access to proper food went, and, yes, it does mean that we can’t really improve upon what we have available today as far as food productivity. There’s still dire hunger in the world, but once addressed, providing food security to the entire world will not be boosting the population any more.
That alone is a massive change from what things used to be like. Global population stability means that global economic growth will also level off. Industrialization and computerization have brought massive increases in productivity per worker, but they have also peaked. A set number of workers times a set level of productivity means a set level of production. No change means no growth, simple as that. Should we experience another boost in productivity, it will be because of robotics providing us with the equivalent of a slave class to do work for us all. Humans themselves are not going to be making much more stuff than they already make.
As for the robotics business, I don’t see that as a panacea for growth because of the decline in availability of cheap fuels and metals. There’s a finite amount of these resources in the world, and we’ve about run out of the easily extractable stuff. I remember the pit in my stomach the first time I saw $3 per gallon gas in 2005. Now, it’s pretty much expected – low, really, when I think about it. Fossil fuels and metals are not renewable, so what we’ve used isn’t coming back. Replacement fuels are on the horizon, but replacement metals depend upon us finding a way to devour the asteroid belt with the question if such an effort will produce enough to justify the cost that went into such an effort.
But no matter if the problems of energy and metal are solved or not, couple them with the maxing-out of human population and productivity and one has a world that is not like the world of the past 250 years, that saw steadily increasing human populations and productivities coupled with access to cheap fuels and metals. There were some horribly exploitative work arrangements for the slaves and near-slaves of the world during that time, but the world built on their muscle, bone, and blood did result in what we have today. The massive jump in birthrates gave us a huge supply of cheap labor that could be exploited, come to think of it.
And where the labor could not be exploited, the jobs for that labor vanished. I remember when all the jobs were getting shipped over to China. Now China is desperately choking to death on its own lack of regulation. It’s starting to starve, as well, which means those factories simply have to stop polluting – which means they will have to go elsewhere that does not yet have laws against poisoning the air, land, and water. Once those areas are exhausted, the world will then be empty of places where labor can be exploited as cheaply as it currently is in China. That then means overall higher prices for things. And if fuel and metal also rise in cost, those finished goods will be higher still in their prices.
Which brings me to the standard of living. It’s not just recently on the decline, it’s been on the decline after a period of leveling-off. For all the innovation we have in electronic goods, we still haven’t found a way to make homes truly more affordable. For all the access to college we now provide, we still haven’t found a way to properly employ people in their chosen fields. For all of the social progress we’ve made, we still haven’t found out how to end wealth disparity and the problems that creates in a society. The standard of living for all but the very rich is in decline – globally – and this is something very different from the last 250 years.
Now, the decline itself will not proceed relentlessly. It comes to an end, and we have a new stability in that area. Should we have access to more cheap metals and fuels, then we face a relatively comfortable future, but a static one. Entertainments will dazzle us forevermore, I’m sure. Life spans could increase greatly, with great strides in health so that we enjoy those days greatly, but neither entertainment nor long, healthy life will provide a fundamental change in the way things are to bring us back to days of ever-increasing population and productivity. It’s just a different sort of stability from what existed prior to industrialization.
And what of the future in which we do not have cheap metals or fuels? What if the advances in longevity and health are for the very rich and the poor are left with what they currently have, as far as days on the earth go? Then we will see a stability, but it will be quite a bit more brutish than anyone really cares to imagine. But it’s the alternative if we do not find a way to address the issues of fuel, metal, and wealth disparity. There’s a very good chance we can master the first two tasks and fail in the third, since that always seems to be a failure of humanity.
Even when humans rise up to smash the rich and distribute their goods to one and all, a new class of rich emerges from that supposed utopia and the reality of wealth disparity returns. Barring some massive event that wipes out every evil-minded person, we are stuck with economic apex predators – sociopaths that gladly create exploitative arrangements in order to enrich themselves. Murder to get gain, if you want the blunter version.
A static population with a set level of productivity and a ruling elite that maintains a style of living far greater than the mass of human peasantry seems to me like the next era of humanity, possibly with or without cheap fuels and metals. Such an era has been gradually arriving, and may be fully invested by the middle of this century, certainly by this century’s end.
And should we manage to find a cure for evil, then we’re still faced with the stable population with a stable level of productivity. We may be more equal in what we have, but we will have what we have, and that will be that. No more growth, really, with or without the fat-cat bankers. So what, then?
We’re heading for an era where we no longer consider material growth to be a good thing, or even a thing. The materialism of this age will give way. Generational expectations of something better cannot exist when generations repeat the experiences of previous generations. With materialism no longer offering itself as an answer for what ails a person, spiritualism and traditions will have more meaning in peoples’ lives.
I say that China may be the future of the world, but I don’t mean it the way stock traders or manufacturers mean it. I mean it in a historical sense, with an imperial dynasty served by technocrats, watching over a large, stable population that pretty much does what it’s always done, year in, year out. I don’t mean that the ruling class will be made up of Chinese people. I mean that whatever rulers we have will have more in common with the mandarins than they will with the top men of the West during the past 250 years.
The goodness or badness of such a system will depend largely upon the people running it. It would likely be mostly bad, given the track record of extremely wealthy rulers. But, such is our coming lot. Freedom to choose one’s course in life is vanishing for anyone not in the very wealthiest of families. The replacement is a fork in the road: either choose to do something that the wealthy find to be of value, in order to enjoy some of the benefits of the lives of the wealthy, or be part of an urban mob that toils away at supporting itself after paying out, one way or another, to support the parasites at the top.
That last part I see as being already firmly in place. This has enormous implications for one and all. The world of the past 250 years may not yet be entirely gone, but it’s fading fast. Kids can still grow up to do whatever they want to do, but there’s no guarantee they can make a living at it anymore. Better to realize that they need a valuable skill to be a valued person so that they can enjoy a life that affords them the free time they’d like to have in order to pursue a dream. Those valuable skills are not attained easily, so those that want to do the hard work will enjoy a measure of reward. Those that shy away from the difficult things – math, memorization, languages, science – will later on envy the lives of those that embrace them. As Vaclav Havel said, “We must be tough in the interest of a good thing.”
This was something I wrote on a forum in response to that question. Consider this to be career guidance for any young person looking to get ahead in the world.
The first time I left teaching, I got into IT. I realized that it was like the Wild West as far as careers went. See, I had a great-grandfather that got to be an engineer for the railroad because there was an opening and he learned quick how to use dynamite. He later found out the opening was created because his predecessor apparently didn’t learn the ins and outs of dynamite quickly enough. No college degree required, no certification exam, just hands-on, can-you-do-it stuff. If you said “yes”, you got a shot at proving yourself. If you were wrong, you didn’t last long. If you were passably good, your career was set.
That’s how it was in the 90’s. If you could spell “PC”, you had at least an entry-level job. As I watched my compensation packages grow from job to job and over year to year, I thought that the pay would eventually draw in millions more people to the profession, like medicine, law, and business had in theirs, and that the requirements for job qualifications would get more stringent. I thought then that, by 2005 or so, everyone would need a CS degree and post-graduate certifications on the lines of a bar exam/MCAT/CPA/brokerage license in order to be a practicing networking professional. Like engineering, the Wild West days would fade to more structured qualification procedures and regimented courses of education, just to weed out the people that wanted the money, but didn’t have the talent.
When I taught economics for 11 years after leaving IT in 2001, I kept up with what careers had good prospects and which ones were getting harder to get in to. I was always pleasantly surprised each year as IT jobs remained hard to fill. People were not flocking to them. If you were a talented person that wanted to rise quickly, relative to other jobs, IT was the way to go. There was a rough patch in the early 2000s when there was the outsourcing craze, but that has passed over and IT jobs are back on native soil. Because of the lack of talent in the field, the jobs are still Wild West jobs. Can you do it? If you don’t blow yourself up, you have the job. If not, consider your last brush with dynamite to be your exit interview.
2008’s crash changed a lot of things. It ended the days when a college degree meant an automatic job, regardless of your major. Those jobs are going, going, and gone, either because the company that did that stuff is closed permanently or because a Python script can now do that same job – which means a business can stay profitable in a recession/depression, but only if it cans the humans that are less productive than a script. Read this, especially if you have children: Oxford report on employment.
The summary is simple: computers are replacing people in low-skill and semi-skilled jobs. Pages 57-72 show a list of jobs and the probability a computer takes it over. Network admins? 3% chance of losing a job to a computer. Compare that to Cashiers at a 97% chance of getting canned in favor of a computerized system. 47% of US jobs are at high levels of risk of being lost to computers, and many of those jobs are where the middle class used to eke out a living.
I wanted to leave teaching in 2013, and because the IT world still had many jobs and few qualified persons, I returned to the Wild West. My teaching job is still there, but it’s no longer the kind of teaching I want to be doing. Although the Oxford survey I cited puts a low chance on teachers being replaced by computers, teaching itself is giving way to online content delivery, with the teacher being a sort of combination child psychologist/prison guard that follows a strict syllabus in lockstep content delivery. My job here in IT still affords me great leeway to apply my professional knowledge and I am happy to say that I am well compensated for my skill.
True, I have to put up with constant recruiter emails, but that’s a nice problem to have. I see people desperate to get minimum-wage jobs where they have to put up with all kinds of awful, picky, petty requirements in order to keep those jobs. I see people crowding into colleges because that was the rat maze path that used to deliver the cheese at the end. They graduate with massive debt, no job, and misery awaiting them as they get in line to get a minimum-wage job where the assistant manager is a guy that started there right out of high school.
Take the same guy that has a knack for thinking well and, instead of putting him into a college, get him to spend a few thousand dollars on equipment and certification materials. After a few months, he’s ready for an entry-level IT job. Salaries there are in the $40K area, well above the average starting salary for a college graduate of $30K, which is down $3K since peaking in 2008. The same guy getting $40K also has no student loans to pay off, so he’s ahead of the recent grad in that respect, as well. If you look at the time spent, college means exchanging four years of drawing a salary in the hope of getting a bigger salary with that degree. Compared to an IT career, it doesn’t add up. The guy that spends a few months getting a CCNA starts out at $40K, and earns that much or more for the next four years while his counterpart is living in a dorm at the university. After those four years, the IT guy can be a CCNP, possibly in multiple areas, and will be contemplating a CCIE and a six-figure income, if he doesn’t have that already. The guy with a BA in some liberal arts area? $30K, *if* he gets a job, and it’s a long, hard slog to the top. A BS in engineering can get a person to the $60-80K area, but that’s still with debt. Meanwhile, our CCNP is already clearing that much or more after 4 years, debt-free. It’s not a life of luxury, but it *is* a life that affords many opportunities and options because of the amount of money being earned.
Let’s say that our networking guy is being considered for a management position and he’d like to get into that area, but he needs a college degree. Guess what? He’s probably now at a company that will pay for his college, provided he makes good grades. Worst case, it’s on his own dime, but he’s earning his way through college the right way, with a full-time job in a career with potential.
That’s why I’m in networking. It offers an exceptionally rapid career development phase for a person with talent. If poets were similarly rewarded with a similar dearth of qualified persons in the profession, I’d be slinging rhymes and anapestic hexameters for a living. They’re not, so I’m a networker. Very early on in networking, you’ll have a job that pays better than 75% of the available jobs out there. That cutoff for that better than 75% number is an annual salary of $50K, by the way. When you hit your stride in the mid-range of IT jobs, you’ll be in the top 10%, easily. Again, it’s not cruising around the world on your yacht as you work remotely 15 minutes per day, but it *is* decent and cheap life insurance quotes, retirement, paid time off, and flexible workplace policies for the most part. Considering the outlay and the return on investment, it’s one of the best things one can do as far as career choice goes.
Yes, I enjoy what I’m doing, but I also know there’s a lot of crap they can throw at me that’s mitigated by my compensation package. This is not a minimum-wage job that I can do no better than the next shlub waiting in line behind me. This is a field in which most employers know that if they’re not offering a good deal that their IT talent can walk out the door at any time and start somewhere else where there is a good deal. This will continue until kids decide that this is where the gold rush is and swarm the profession. That is not likely to happen for two reasons: math and smartphones. People see numbers and they panic, typically. Subnetting turns away most folks not already scared off by the 10 in 10BaseT, let alone the 100 in 100BaseT. Smartphones mean that kids that would have been tinkering with their PCs no longer have those in their hands, so there are far fewer PC/Network gurus in the making among the rising generation than there were in GenX and GenY. It’s going to be wide open for a good, long time, and while I’m not planning on becoming complacent, I’m also not worried about a Python script suddenly doing my job. This is a good field to be in, where merit and talent are proportionately rewarded with quality of work and compensation packages.
If a kid out there can learn to get over the natural human tendency to be afraid of numbers and then gets his hands on a PC and some second-hand routers and switches, he’ll be well-placed to enter a dynamic, rewarding, challenging career in networking. Given the costs and rewards of the alternatives, it’s easy for me to see why one should choose a career in networking.