CNN Host’s Attempt to Explain the U.S. Economy Was So Bad I Started Yelling at the TV

Lambert here: I never yell at the TV. I don’t have one. It does seem to me that Leopold confuses the pointing finger (stock buybacks) with the moon (the power of the 1%). But the contrast Leopold draws between the United States and Germany is instructive.

By Les Leopold, the director of the Labor Institute, who is currently working with unions and community organizations to build the educational infrastructure for a new anti-Wall Street movement Originally published at Alternet.

Honestly, I don’t usually talk back to the TV. But I couldn’t contain myself during Poppy Harlow’s December 10 interview with John Feltner, the United Steelworkers vice president of the Rexnord local union where 300 jobs are moving from Indianapolis to Mexico.

In discussing the move, Harlow twice resorted to the much repeated trope that the loss of American manufacturing jobs is really about automation and technology.

HARLOW: What is the number-one thing you would like to see the incoming administration do that you think will help people in your situation? Because, you know, Donald Trump points to global trade as being the reason that your jobs are going away. That’s not all of it. A lot of it is, as you know well, automation and technology.

FELTNER: These companies are leaving to exploit cheap labor. That’s plain and simple. If he can change those trade policies to keep those jobs here in America, that’s what we need. We need American jobs, not just union jobs.

HARLOW: But you agree it won’t save all of them, because of automation, because of technology.

Please Poppy, come off it! Feltner is right. Offshoring is about the rush to cheap labor, not about automation and new technology. The move to cheaper labor in Mexico, in fact, allows corporations to avoid investing in new technologies. Rexnord and Carrier are moving the same old technologies to Mexico, piece by piece.

Ever Hear of Germany?

Instead of regurgitating meaningless economic platitudes, newscasters and pundits should confront some facts about Germany’s extensive manufacturing sector.

Fact #1: Germany uses the most advanced technologies in the world.

Fact #2: Manufacturing workers in Germany earn much more than their U.S. counterparts: 44.7% more in textiles, 44.6% more in chemicals, 34.2% more in machine tools, and 66.9% more in the automobile industry.

Fact #3: Manufacturing jobs make up 22% of the German workforce and account for 21% of the GDP. U.S. manufacturing jobs make up only 11% of our workforce and only 13% of our GDP.

Fact #4: The economic gods either speak German or the Germans are doing things differently from their U.S counterparts.

Rather than divine intervention, German manufacturing depends on producing high-quality products that are so good people the world over are willing to pay a premium for them. The most sought-after, high-end motor vehicles (Mercedes, BMW, Audi) and kitchen appliances (Bosch, Miele) are produced by German companies using highly trained, well-paid workers and the most advanced technologies.

The German manufacturing juggernaut depends on vast investments in innovation (by their government), in research and development (by their firms), and in worker education and training (by both the government and the firms).

U.S. Addicted to Stock Buybacks

American manufacturers have chosen a different path. Their CEOs grow wealthy by financially strip-mining their own companies, aided and abetted by elite financiers who have only one goal: extracting as much wealth as possible from the company while putting back as little as possible into production and workers.

The heroin driving their addiction is stock buybacks—a company using its own profits (or borrowed money) to buy back the company’s own shares. This directly adds more wealth to the super-rich because stock buybacks inevitably increase the value of the shares owned by top executives and rich investors. Since top executives receive the vast majority of their income (often up to 95%) through stock incentives, stock buybacks are pure gold. The stock price goes up and the CEOs get richer. In this they are in harmony with top Wall Street private equity/hedge fund investors who incessantly clamor for more stock buybacks, impatient for their next fix.

For the few, this addiction is the path to vast riches. It also is the path to annihilating the manufacturing sector. (For a definitive yet accessible account see “Profits without Prosperity” by William Lazonick in the Harvard Business Review.)

Wait, wait, isn’t this stock manipulation? Well, before the Reagan administration deregulated them in 1982, stock buybacks indeed were considered stock manipulation and one of the causes of the 1929 crash. Now they are so ubiquitous that upwards of 75% of all corporate profits go to stock buybacks. Over the last year, 37 companies in the S&P 500 actually spent more on buybacks than they generated in profits, according to Buyback Quarterly.

Little wonder that stock buybacks are a major driver of runaway inequality. In 1980 before the stock buyback era, the ratio of compensation between the top 100 CEOs and the average worker was 45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is closer to 150 to 1.)

Germany holds down its wage gap, in part, by discouraging stock buybacks. Through its system of co-determination, workers and their unions have seats on the boards of directors and make sure profits are used to invest in productive employment. As a result, in Germany stock buybacks account for a much smaller percentage of corporate profits.

Between 2000 and 2015, 419 U.S. companies (on the S&P 500 index) spent a total of $4.7 trillion on stock buybacks (annual average of $701 million per firm). During the same period, only 33 German firms in the S&P350 Europe index conducted buybacks for a total of $111 billion (annual average of $211 million per firm). (Many thanks to Mustafa Erdem Sakinç from the Academic-Industry Research Network for providing this excellent data.)

Let’s do the math: U.S. firms as a whole spent 42 times more on stock buybacks than German firms!

Little wonder that our manufacturing sector is a withering appendage of Wall Street, while German manufacturing leads the global economy.

So why does the media consistently use automation/technology to explain the loss of well-paying manufacturing jobs?

To be fair, Poppy is not alone. Virtually every elite broadcaster, journalist, pundit and columnist claims that the loss of good-paying, blue-collar jobs is somehow connected to new technologies. How can they ignore the fact that in Germany advanced technologies and good-paying jobs go hand in hand?

Part of the answer is that it is reassuring for elites to believe that job loss stems from complex “forces of production” that are far removed from human control. The inevitability of broad economic trends makes a pundit sound more sophisticated than the unschooled factory worker who thinks the company is moving to Mexico just because labor costs one-tenth as much.

Technological inevitability also fits neatly into the idea that runaway inequality in our economy is akin to an act of God, that globalization and technology move forward and no one can stop the process from anointing winners and losers. The winners—the richest of the rich—are those who have the skills needed to succeed in the international technological race. The losers—most of the rest of us without the new skills—see our jobs vaporized by technology and automation.

Too bad. Nothing to be done about it. Stop whining. Move on.

In other words, rising inequality can’t be fundamentally altered.

Sinclair’s Law of Human Nature

Or maybe there’s another explanation suggested by Upton Sinclair’s famous adage: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

The newscasters, the pundits, the top columnists and recidivist TV commentators—nearly all of them are doing very well. They may not be billionaires, but they live in a rarefied world far removed form the worries felt by Mr. Feltner and his brothers and sisters at Rexnord. From their elite vantage point, the status quo may have problems, but it is treating them remarkably well. So quite naturally they are drawn to narratives that justify their elite positions; that altering runaway inequality and its privileges would be futile at best and even harmful to society as a whole. How convenient.

Then again, American media firms are no strangers to stock buybacks. Time Warner, which owns CNN, Poppy’s employer, instituted a $5 billion stock buyback in 2016. That’s $5 billion that, for example, didn’t go to news investigations about the perils of stock buybacks. We don’t know if Poppy Harlow receives stock incentives, but her top bosses certainly do.

What about NBC/MSNBC? Comcast is the parent company which also instituted a $5 billion stock buyback in 2016.

Brother Feltner is right. Corporations are moving offshore to cut their wage bills. But they are not using that money to reinvest in their companies to improve the product and train the workforce. Instead, they are offshoring to gain cash flow to finance their fix. They want more stock buybacks which in turn enrich top executives and Wall Street investors. Automation and technology have nothing to do with this perilous addiction.

So, I’ll stop yelling at Poppy, once she starts covering stock buybacks.

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This entry was posted in Europe, Guest Post, Income disparity, Macroeconomic policy, The destruction of the middle class on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

79 comments

  1. John

    Now I understand. Companies off-shore their manufacturing because Mexico, as an example, has the latest in automation and the highest of high technology. Another example of the “Move alone. Nothing to see here.” mantra.

    1. Minnie Mouse

      Yes, does moving to Mexico, or China, somehow enable more automation? If you are going to automate, why not automate in place and forget
      unnecessary long supply chains.

      1. Dave

        There’s an endless supply of Mexicans that can work cheap, can be trained and who cost far less than complicated machinery. They also have another utilitarian value: driving down wages in America.

          1. Dave

            Fertility, average age, willingness to travel long distances, complimented by other Central Americans creates “an endless supply”.

            Much is made of the net outflow of Mexicans from the U.S., however, when Central American countries are counted, the inflow is still substantial. OK, it is not “endless”, but it’s enough.

  2. fresno dan

    I’m glad I’m not the only one yelling at the TV…..
    ;)

    “HARLOW: But you agree it won’t save all of them, because of automation, because of technology.”

    SO….does it occur to this reported to ask how many jobs are moving from the US to Mexico? If so many jobs are lost to automation at this factory, why is it worthwhile to move to Mexico. HOW MANY jobs lost in the US and HOW MANY jobs gained in Mexico from this plant??? I wouldn’t be surprised that there is a gain in Mexico beyond the number directly moved from Carrier….(extra maintenance, etc.)

    And its a bizarre thing – 99% of “news” is in fact “analysis” – and they are remarkably wrong – yet NONE of them are ever fired…

    1. oh

      Most of the time people on CNN are yelling (I don’t watch them for that reason nor any other TV program) . I think it’s good to yell back. :)

  3. Cry Shop

    What Mexico offers for some segments of the steel industry is the ability to by pass emissions controls. This, much more than labour, is a primary attraction for process industries like steel/petrochemical, where the goods are all most never touched by human hand.

    While it also offers proximity to market that building a similar, high emissions plant further south into Central/South America (or further west into Asia) can’t compete, even with labour cheaper than Mexico’s. Because NAFTA does not require economic impact equivalents, industries with high costs of compliance will go where there is nothing to comply too.

    1. rd

      Environmental regulations in general are lower in the off-shore areas. Those countries are where we were 50 years ago with polluted air, water, and land. However, as the citizens have better and more stable lives. they will insist on improved conditions. We are already seeing some of that start in China and other countries. We had to invent many of the technologies in the 70s-90s, so those countries will be able to improve their lot much faster if they want to because they will be able to buy off the shelf technologies.

      Countries like China are moving forward with renewable energy, as much because it means clean air and water, as it does reduced reliance on the cantankerous Middle East and greenhouse gas emissions. It will be interesting to see what happens when US voters figure out that the goal of the current Republican party is to return the US environmental condition to a Third World country. Keep in mind that nearly all of the major environmental laws were signed by Republican presidents.

  4. Dwayne

    Every buyback returns cash to the investor – who then has to re-invest in something else to continue getting returns, so to some extent equity buybacks of one company result in new investment in some other company. To the extent that a company’s growth prospects are dim, there are many many situations in which buybacks make complete sense – as that company simply needs less and less capital for a shrinking industry. So why should they be heavily capitalized with low growth prospects?

    1. Jim Thomson

      It is still stock manipulation, plain and simple. And the decision to do it is made by the executives who benefit the most from it. And it was illegal for a good reason, and it was made legal for another good reason.

      If the executives have so much retained earnings that they do not know how to invest them properly then they are incompetent in their jobs and should be replaced. They should not be allowed to use corporate funds to manipulate the stock price up to their own benefit.
      Even worse, in some cases the company borrows money, at today’s low interest rates, to buy back stock.
      When this occurs pervasively, as it has been for some time now in the US, it is a sign of stagnation of the corporate sector.

      1. Charles Fasola

        @ dwayne, In which class were you “accidentally” born into. Not hard to make a guess is it. Don’t bother with your already anticipated tesponse. Since I know fairwell the answer. The child of a poor substistance farmer who was made to walk five miles in knee deep snow to learn all that you now do.

      2. Benedict@Large

        Buy backs are not manipulation any more than increasing the dividend is. In both cases, the corporation is saying it has more money than it needs, and that that money should be returned to the company’s stockholders, allowing them to choose how that money will be invested instead of having corporate management do it for them.

        The concern over stock buy backs is simply people focusing on part of a larger transaction instead of seeing the whole thing. It is the difference between micro thinking and macro thinking, otherwise known as failing to see the bigger picture.

        1. Paid Minion

          Of course, none of this excess money is EVER returned to the company’s employees, who generated the money to begin with.

          Signed,

          Former employee, who listened to this BS from the suits about keeping the cost of labor “competitive” to justify no raises or COLAs.

        2. Dwayne

          Benedict – you are spot on. Sounds like a lot of the other responders are either bitter shorts that have been burned by buybacks just generally shallow thinkers. They will be giving their same economically baseless arguments for the rest of their lives unless they learn to open their minds.

          Those who are arguing for a dividend instead of a buyback are making a foolish argument – as if a significant dividend increase wouldn’t see a significant rise in the stock and hence a similar effect as a buyback. Of course a dividend increase would see a significant rise in the stock price just like the buyback.

          As to those whining about workers at-risk and executives with pay tied to the stock price – they mention nothing about the fact that workers risked no capital and can head for the door whenever they like, and that executives risked having part of their pay go to $0 in the event of an industry or economic downturn, and locked them into staying at that company for a period of time (if they leave, their options get taken away). The risk profile of a salaried worker and an executive are far different – and hence their economic outcomes are rightfully different depending on the financial performance of a company.

          1. cnchal

            . . . Of course a dividend increase would see a significant rise in the stock price just like the buyback.

            Why is that almost never the option taken?

            As to those whining about workers at-risk and executives with pay tied to the stock price – they mention nothing about the fact that workers risked no capital and can head for the door whenever they like, and that executives risked having part of their pay go to $0 in the event of an industry or economic downturn . . .

            In the event of an industry or economic downturn those workers risk all of their pay going to $0

            Your argument reminds me that a rich person has just as much right to sleep under the bridge on a freezing night as the poor person.

            Executives of publicly traded companies are not the owners, but act with impunity as if they are, and they risked no capital either.

          2. a different chris

            Do you guys live in the real world? The company hires (from among their friends) a CEO, COO, whatever. These people are “granted stock options”… ok, those stocks don’t even exist so basically they just dilute the holdings of everybody who was working there. After a few years they “cash out” where money comes from basically the worker’s pockets.

            How’s that for “shallow thinking”?

            > that executives risked having part of their pay go to $0 in the event of an industry or economic downturn, and locked them into staying at that company for a period of time (if they leave, their options get taken away).

            Sigh. How many links can NakCap readers come up with that shows that this is exactly what *doesn’t* happen. Lemme guess, Dwayne, economic major?

          3. Lambert Strether Post author

            > The risk profile of a salaried worker and an executive are far different

            Absolutely. An executive is a “made man” who can loot with impunity.

            A worker can lose their home and their health with a single mistake or a run of bad luck.

            Indeed the risk profiles are far different.

          4. Code Name D

            “they mention nothing about the fact that workers risked no capital and can head for the door whenever they like, and that executives risked having part of their pay go to $0 in the event of an industry or economic downturn”

            Workings risk far more than mere capital. Any industries are dangerous requiring workers to put their lives on the line. And often the only thing that keeps them alive is the quality of safety protocols and process safety needed to keep systems running smoothly. The same maintenance and safety that is the first to face cost reductions necessary to fuel stock buy-backs.

            When CEOs start getting decapitated because of defective golf clubs, then come talk to me about “risk.”

    2. John Wright

      Why do share buy backs if growth prospects are dim?

      Why not return the money as a special dividend or pay down debt?

      I’d like to see share buyback proposal prefaced with a statement such as:

      “We scoured the world looking for a suitable investment for our excess cash, there was no additional business enhancing technology we could justify purchasing, no additional R&D into product development we could justify, no additional investment in plant or equipment upgrades we could justify, no additional training for our employees we could justify, no prepayment of debt we could justify, no funding of university research we could justify.”

      “We don’t see a way to use our excess cash to grow/improve our business”.

      “Surprisingly, from the global list of corporate securities we could find no financial security that is at a more attractive price level than our own stock.”

      “So we are buying back our company’s stock.”

      “Take our word for it, it will be a great investment for the future.”

      “Note: our senior executives will be exercising options but not holding onto their option purchased stock.”

      “Personal financial diversification is important to them.”

      1. Chris

        Excuse me, but isn’t one of the main factors driving the buybacks contractual executive bonus payouts?

        As in, if the stock price increases by X%, the CEO gets a maximum bonus Y. The people in the finance wing of these companies are simply solving for how many stocks they need to buyback in order to achieve X. Because they can spend other people’s money to meet that goal, there is no technical or legal barrier to them doing this.

        So, since we can’t mandate more ethical and longer term thinking people become CEO’s, can’t we put a rule into place that no one in the organization performing the buyback is allowed to benefit from a buyback directly? That would make a buyback more like an option of last resort. Which is what it should be, given how corrosive it is to future development of a company.

    3. Jim Haygood

      Stock buybacks inevitably increase the value of the shares owned by top executives and rich investors.

      While this is true as far as it goes, buybacks increase the value of ALL shares — including the roughly one quarter of outstanding shares owned by pension plans.

      Pension plans are an important asset of the middle class. Cut their investment returns, and real people take a hit.

        1. Propertius

          Jim’s argument also applies to 401k and other defined-contribution plans, of course. You do still have a point, though – a lot of people who are eligible for such plans can’t contribute to them because they don’t have any surplus income to stash away – which is, of course, because wages are too low.

      1. John Wright

        So if Company A does a share buyback, Company B, which does not buyback their own stock, sees Company B’s share price increase anyway?

        This is a great deal for company B as they can keep their cash while benefiting from company A’s buyback.

      2. JTMcPhee

        It’s called “talking one’s book,” and working whenever possible to keep the flow of discourse going in the direction that supports one’s wealth and interests…

      3. Mike G

        Goosing investment returns in the short term with buybacks to benefit stock-option insiders, at the expense of underinvestment in productive measures like R&D and training, eventually leads to corporate decline which does no favors for the few middle class people who still have pensions.

      4. Vatch

        Buybacks increase the price of shares of stock, not the value. If a pension plan owns stock which has been inflated by buy-backs, the dividends paid to the pension plan won’t increase. The only way that the pension plan can benefit is by selling the stock. Then the pension plan will need to use the proceeds of the sale to buy something else. But if most companies are inflating the price of their stocks with buy-backs, how does the pension plan find an appropriate stock to buy? If they buy another inflated stock, the value of the pension plan is in the same place as it was before it sold the previous stock.

        It seems to me that buy-backs just cause a bubble. Short term “investors” such as executives can benefit from the bubble, but long term investors such as pension plans aren’t able to benefit in that way.

    4. Altandmain

      Executives often cash in their stock options around the time of stock buybacks.

      http://www.reuters.com/investigates/special-report/usa-buybacks-pay/

      It’s a huge problem of principle agent. The other is that every dollar used to buy back for the company is then one less available for capital costs, R&D, employee training, etc.

      The overwhelming majority of the gains to investors will go to the wealthy as well. Workers get nothing and often worse than nothing when their job security is under attack.

  5. Sound of the Suburbs

    Things were a lot more straight forward in the 18th and 19th centuries and there was far less complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism when there was little Government interference to cloud the issue.

    The Corn Laws and Laissez-Faire, the requirements of free trade, a historical lesson:

    “The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners’ interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive.”

    The landowners wanted to maintain their profit, charging a high price for corn, but this posed a barrier to international free trade in making UK wage labour uncompetitive raising the cost of living for workers and as a consequence, wages.

    The anti-corn law league had to fight the vested interests of the landowners to get the UK in a position where it could engage in free trade. They had to get the cost of living down to a point where they could pay their workers internationally competitive wages.

    Opposing national interests, productive industry and landowner rentiers.

    It’s always been that way, we just forgot.

    Workers have been priced out of international markets by the high cost of living in the West and now we try and tell them that is their fault. It is the elite who do not understand the first thing about free trade unlike their 19th century predecessors.

    The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments. These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

    US investors and companies have little interest in investing in the US due to its high labour costs caused by its own national rentier interests. There are opposing national interests within the US just as there were in the UK in the 19th Century.

    Most of the UK now dreams of giving up work and living off the “unearned” income from a BTL portfolio, extracting the “earned” income of generation rent. The UK dream is to be like the idle rich, rentier, living off “unearned” income and doing nothing productive.

    The UK is itself atrocious and has encouraged rentier interests which oppose the interests of those who want free trade. The UK is now ramping up student loans to make things worse. High housing costs and student loan repayments will have to be covered by wages pricing UK labour out of international markets.

    Things were a lot more straight forward in the 18th and 19th centuries and there was far less complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism when there was little Government interference to cloud the issue.

    The Classical Economists observed the situation which was a lot more clear cut in those days. The Classical Economists thought the cost of living must be kept low with free or subsidised housing, education and healthcare funded through taxes on “unearned” income. “Earned” income shouldn’t be taxed as this raises the cost of doing business, real productive business that earns real wealth.

    Imaginary wealth can be produced by inflating the value of a nations housing stock until the bubble bursts and all the imaginary wealth disappears (e.g. US 2008, Japan 1989, Ireland, Spain, etc …..).

    Ditto all other financial assets.

    The Classical Economists realised capitalism has two sides, the productive side where “earned” income is generated the unproductive, parasitic side where “unearned” income is generated. The vested interests of the two sides are opposed to each other.

    If you forget you can made fundamental mistakes, like today’s ideas on free trade.

    The UK and US have revelled in their ignorance.

    1. Sound of the Suburbs

      Wealth – real and imaginary.

      Central Banks and the wealth effect.

      Real wealth comes from the real economy where real products and services are traded. This involves hard work which is something the financial sector is not interested in.

      The financial sector is interested in imaginary wealth – the wealth effect.

      They look for some existing asset they can inflate the price of, like the national housing stock. They then pour money into this asset to create imaginary wealth, the bubble bursts and all the imaginary wealth disappears.

      1929 – US (margin lending into US stocks)
      1989 – Japan (real estate)
      2008 – US (real estate bubble leveraged up with derivatives for global contagion)
      2010 – Ireland (real estate)
      2012 – Spain (real estate)
      2015 – China (margin lending into Chinese stocks)

      Central Banks have now got in on the act with QE and have gone for an “inflate all financial asset prices” strategy to generate a wealth effect (imaginary wealth). The bubble bursts and all the imaginary wealth disappears.

      The wealth effect – it’s like real wealth but it’s only temporary.

      The markets are high but there is a lot of imaginary wealth there after all that QE. Get ready for when the imaginary wealth starts to evaporate, its only temporary. Refer to the “fundamentals” to gauge the imaginary wealth in the markets; it’s what “fundamentals” are for.

      Canadian, Australian, Swedish and Norwegian housing markets are full of imaginary wealth. Get ready for when the imaginary wealth starts to evaporate, its only temporary. Refer to the “fundamentals” to gauge the imaginary wealth in these housing markets; it’s what “fundamentals” are for.

      Remember when we were panicking about the Chinese stock markets falling last year?

      Have a look at it on any web-site with the scale set to max. you can see the ridiculous bubble as clear as day.

      The Chinese stock markets were artificially inflated creating imaginary wealth in Chinese stocks, it was only temporary and it evaporated.

      It’s what happens.

      1. JTMcPhee

        Did the Chinese who used the “money” they got from inflation of stock prices to buy real estate and other tangible assets, with that “money,” continue to have legal ownership of said assets after the market collapsed?

        If they did, it’s amazing how “wealth” gets created…

    2. Outis Philalithopoulos

      FYI, Sound of the Suburbs, your comment contains a duplicated paragraph. This sort of thing tends to get flagged by the computer as spam.

  6. Marie Parham

    The good news is that my son tells me only a few old people get their news from cable news shows.

    1. linda amick

      I gave up TV 6 years ago and I am old. TV is awful for so many reasons. One of them is the fact that it dictates lifestyle and values. I hate it for children.

  7. hidflect

    Harlow is just using what I call the 3-legged stool approach which is to blunt any argument by introducing rotating facets. You see it in arguments about the West Bank. If you mention Zionist, they rebut with Israeli. If you say Israeli, they introduce Jewish. Round and round you go until the point is lost.

    Aside: I’d pay money to see Lambert yelling at a TV. The way he carves some people up on this site makes my toes curl. No matter how much they deserve it, I feel really sorry for them.

  8. ambrit

    Silver lining time. Without TV to emote to, my blood pressure is lower overall. This trade off is very beneficial to me.
    Also germane is that a hundred years ago, the cheap labour was pouring into America from offshore. Now that population has stabilized, the labour is no longer as cheap, (it is still too cheap, but,) in America. Companies are generally about the “bottom line.” Socially conscious corporate management is feted and lionized for a reason; it’s rare.
    Regulation and enforcement is the key. Buy local, shop local, govern local.

    1. a different chris

      >Buy local, shop local, govern local.

      Yup. Unfortunately that can’t be applied to the environment, where everybody is downstream and downwind of everybody else. I don’t believe in God, but if you do then you can claim that’s why he made planets spherical. :)

  9. Carolinian

    While I do have a tv I don’t get CNN. Thank gawd. In fact the indignity of paying for CNN with its inane announcers and endless commercial interruptions was a big motivator for “cutting the cord.”

  10. Carl

    Count me as another who doesn’t have tv. The Jimmy Dore Show and various online videos make up our viewing. In fact, it’s difficult to read NC and other sites and then see the drivel that passes for tv news. But just keep it up, guys (MSM); you’re one of the main reasons we have a huge alienated population of have-nots, and the unwashed masses are becoming restive.

  11. John Wright

    The automation=job loss meme has been picked up in other places.

    On the Saturday before the election, I visited the local Democratic headquarters in my Northern California town to get a Clinton-Kaine bumper sticker for my collection.

    As they wanted $1, I wanted to get some entertainment value from the purchase, so I asked one of the elderly women “What has Hillary ever done?”.

    She responded with “Financial reform”, apparently confusing HRC with Elizabeth Warren.

    I mentioned that Hillary supported the TPP, until well into her campaign, and that trade bills had cost jobs.

    Her immediate response was “More jobs have been lost to automation than trade bills”.

    I was surprised she had this explanation at the ready, perhaps it was given to HRC campaign workers as a talking point in case someone questioned HRC’s commitment to stopping the TPP.

  12. cnchal

    There is a meme being told from the people at the top, to the peasants.

    Part of the answer is that it is reassuring for elites to believe that job loss stems from complex “forces of production” that are far removed from human control. The inevitability of broad economic trends makes a pundit sound more sophisticated than the unschooled factory worker who thinks the company is moving to Mexico just because labor costs one-tenth as much.

    The other day someone left a link to an article by an economist named Scott Sumner, where at the end of his article the same meme is put forth, with a twist.

    Automation Destroyed 20 Million Manufacturing Jobs

    So what’s all this really about? Perhaps the “feminization” of America. When farm work was wiped out by automation, uneducated farmers generally found factory jobs in the city. Now factory workers are being asked to transition to service sector jobs that have been traditionally seen as “women’s work”. Even worse, the culture is pushing back against a lot of traditionally masculine character traits (especially on campuses). The alt-right is overtly anti-feminist, and Trump ran a consciously macho themed campaign. This all may seem to be about trade, but it’s actually about automation and low-skilled men who feel emasculated.

    Unschooled and low skilled are code words for stupid, and the meme is, men that make stuff are stupid.

    Within his article is an interview of the CEO of United Technologies by Jim Cramer in Business Insider that he quotes as confirming his reasoning that automation is solely responsible for all the job loss and that offshoring and globalization caused zero manufacturing jobs to be lost in the US.

    The result of keeping the plant in Indiana open is a $16 million investment to drive down the cost of production, so as to reduce the cost gap with operating in Mexico.

    What does that mean? Automation. What does that mean? Fewer jobs, Hayes acknowledged.

    From the transcript (emphasis added):

    GREG HAYES: Right. Well, and again, if you think about what we talked about last week, we’re going to make a $16 million investment in that factory in Indianapolis to automate to drive the cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with lower cost of labor? No. But we will make that plant competitive just because we’ll make the capital investments there.

    JIM CRAMER: Right.

    GREG HAYES: But what that ultimately means is there will be fewer jobs.

    The general theme here is something we’ve been writing about a lot at Business Insider. Yes, low-skilled jobs are being lost to other countries, but they’re also being lost to technology.

    Everyone from liberal, Nobel-winning economist Paul Krugman to Republican Sen. Ben Sasse has noted that technological developments are a bigger threat to American workers than trade. Viktor Shvets, a strategist at Macquarie, has called it the “third industrial revolution.”

    Economists can’t add. $16 million in investment, of real goods to improve productivity to the point where air conditioner production in Indianapolis can compete with Mexican production cost using existing technologies that are ripped off the shop floor and trucked to Mexico, itself creates jobs, and the improved more highly automated plant still retains jobs here, along with the technology.

    That $16 million investment happened only because Donald Trump either threatened or promised something for United Technologies, but the number of jobs lost now are not solely due to moving all production to Mexico, which would have been what happened had he not used his power of persuasion to pry some money for investment out of the United Technologies bank account.

    I wonder what Scott Sumner and the rest of the economists think of the women that work in manufacturing? Are they stupid too?

  13. diptherio

    In 1980 before the stock buyback era, the ratio of compensation between the top 100 CEOs and the average worker was 45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is closer to 150 to 1.)

    45 to 1, 150 to 1, 844 to 1….it’s all ridiculous. Just because you wear a suit and have your own office to work in does not somehow entitle you to make as much in a year (or a month or a week) as much as someone else does in a lifetime.

  14. Paul Tioxon

    Stock buybacks are a problem of such proportions, that it is a subject all by itself. To connect it to Germany’s Industrial policy is a perfect example of ahistorical, faulty, unempirical analysis at its worst leading to the politics of simpletons. The stock buybacks reference here are recent, 21st Century. The de-industrialization of the US goes back to the immediate post WWII policies of corporate America as well as the US Government.

    Germany’s industrial policy has complex contributing factors which has a more important contributing factor in its military expenditures. This of course is directly related to Germany’s history. It lost WWII and was an occupied territory, eventually split into an East And West Germany. For many years, even as a NATO member, West Germany spent almost ZERO on military expenditures. This comes with being an occupied nation that lost a war. Even today, the US Marine Corps alone has a budget that exceeds all of the re-united Germany’s military budget. Germany, for obvious historical reasons has been deliberately suppressed as a military power, even in meager self defense, back when a Soviet doppleganger was on its border. Of course, when the US Government stations on your soil, almost 100,000 or more military personnel, armored tank divisions and US Air Force bases for decades, you can avoid the cost of national defense.

    —————————-

    “German Chancellor Angela Merkel said on Saturday that Europe’s largest economy would significantly boost defense spending in the coming years to move towards the NATO target for member states to spend 2 percent of their economic output on defense.

    But Merkel, addressing a conference of the youth wing of her conservatives, did not specify by how much defense spending would rise.

    Merkel said U.S. President Barack Obama had told her it could no longer be the case that the U.S. spends 3.4 percent of its gross domestic product (GDP) on security while Germany – its close NATO ally – only spends 1.2 percent of GDP on that.

    “To get from 1.2 percent to 2 percent, we need to increase it by a huge amount,” Merkel said.

    In 2016 Germany’s budget for defense spending stands at 34.3 billion euros so it would need to be increased by more than 20 billion euros to reach the 2 percent target.”

    http://www.reuters.com/article/us-germany-merkel-defence-idUSKBN12F0JU?il=0

    ————————————————-

    And for decades, avoid the burden of military expenses it did, to the direct contribution to its industrial manufacturing center. Chalmers Johnson reviews this critical aspect of America’s Hegemony since WWII in the course of several books. He was a CIA analyst as well academic economist expert on Japan and China. The US economy suffered disinvestment in its tool and die and metal working sector to the tune of over $7Trillion while building up the Pentagon into the Global Military Hegemon that it is today. The platform of the manufacturing center dependent on tool and die to make the parts of the machinery of factories and weapons of wars was in decline and overtaken by the Japanese and the Germans. We outspent the Soviet Union and now the rest of the world by staggering margins. But, to make and maintain the machinery of war, the Great American Killing Machine, global bases and global industrial skills and equipment replaced the domestic. The US Naval bases from Boston, Brooklyn, Philadelphia-founding locale of the US Navy and US Marine Corps, Baltimore, and on and on, all gone. Replacing the base closures, Guam, Okinawa, Rota, Spain, Naples, Italy Ramstein, Germany, and on and on. And Germany and Japan, played their roles to keep up American military might in exchange for our nuclear umbrella and military protection. This to the detriment of jobs in the US.

    ——————————————————————————
    “After World War II, the US reduced defense spending to 7.2 percent of GDP by 1948, boosting it to nearly 15 percent during the Korean War. During the height of the Cold War with the Soviet Union US defense spending fluctuated at around 10 percent of GDP.
    At the height of the Vietnam War in 1968 defense spending was 10 percent of GDP. But then it began a rapid decline to 6 percent of GDP in the mid 1970s and hit a low of 5.5 percent of GDP in 1979 before beginning a large increase to 6.8 percent in 1986.
    Starting in 1986 defense spending resumed its decline, bottoming out at 3.5 percent of GDP in 2001. After 2001, the US increased defense spending to a peak of 5.7 percent of GDP in 2010. It is expected to reduce to 4.5 percent of GDP in 2015 and 3.8 percent by 2020.”

    http://www.usgovernmentspending.com/defense_spending

    ——————————————————————————–

    For 20 years from the end of WWII, military expenses soaked up about 10% of the annual GNP. Those amounts dwarf stock buy backs. As you can see from the excerpt above, the military bill to the US is enormous and as a global military, much of this money is spent outside of the US, employing people outside of the US, many who are not US citizens. As bad and as large as financialized capitalism is, the jobs are lost more to wasteful military “Keynesianism”. The 10s of $Trillions$ for most of the 2nd half of the 20th Century explains more than stock buybacks, which of course are more than statistically significant, just not in the same league as Imperial America.

    Automation, deindustrialization and run away factories together formed the basis for weakening organized labor and reducing the amount of good paying working class jobs with their good benefits and security. Job security comes in the form of unemployment benefits due to the boom/bust business cycle that has factories operating on 2 or more shifts and then cut back due to saturation and or slack demand. Mexicans thrown out of work are easier to deal with than unemployed Americans, not only due to costs but also political fallout. Unemployed Americans can still vote congressmen out of office every 24 months if they are that unhappy with the economy. You don’t need a job to vote. But alas, that is also another large scale problem, all by itself that deserves focused analysis and comments.

    1. Ted

      Soooo … it’s back to blame the gub’ment and give Capital a pass, eh? I see what you did there … nice work. I particularly enjoyed your fantasy that unhappy workers can vote their congressperson out every two years … ‘ cause that’s empirically true of the US political system.

      1. paul Tioxon

        Ted
        In the future when you comment, not just for me, but anybody really, it is customary to have a comment. It’s not that you blurt out filler, but it is time lost that will never be returned to anyone, especially yourself. So, Ted, show a little self-respect, at least for your sake.

      2. Yves Smith

        Paul is right. While you may have had a point to make, your form was not an argument but personal attack. This is not a chat board. Commenting is a privilege, not a right.

        You go into moderation.

        And I suggest you read our site Policies before commenting again. If you jailbreak, not only will you be banned but your comments will be expunged.

  15. TG

    Triple kudos! Well said!

    All this stuff about ‘automation’ killing jobs is just a distraction. It’s not happening, not overall. That’s why productivity figures are going down – they should be skyrocketing if automation was to blame. The number of janitors and maids that have lost their jobs to a Roomba robotic vacuum cleaner is zero. The number of truck drivers that have lost their jobs to robotic trucks is zero. Shrimp are still flown to Malaysia, peeled by hand using slave labor, and then flown back, because it’s cheaper than developing and building and maintaining automated shrimp peeling machines. And so on.

    Why are the elites still so set on moving jobs to low wage countries? Why are they still so set on an open-borders immigration policy? Because they know what they aren’t telling us: right now general robotics is still in its infancy, it’s all about cheap labor.

    So many otherwise rational and skeptical people have been distracted by the false ‘robots are now making human workers obsolete’ meme. Congrats again on such a clearly reasoned piece.

  16. Brad

    The difference between German and US industrial manufacturing is social, not technological. It only demonstrates that in the face of the displacement of labor with machines, social measures are required to address the fact that a smaller percentage of total available labor is required to produce the necessities of life. One way Germany has addressed this is by targeting high value-added manufactures. In addition, historically manufacturing exports have always played a more important part for Germany than for the US, never a big manufacturing exporter unlike (in the 19th C) Britain, Germany, Japan and now China. US manufacturing was always primarily oriented towards the home market, beginning with the Midwestern farmers and their McCormick reapers and Montgomery Wards catalogs in the 19th C. The US has always been a primary products (oil, agri, timber, minerals) exporter. Plus weapons. Kinda like…Russia. Its two biggest trading partners are its continental neighbors, Mexico and Canada.

    The debate over whether job loss is due to automation or offshoring tends to be short on facts. One almost never see a statistical breakdown that might tell us how much job losses are due to one factor or another. That includes John Smith’s “Imperialism in the Twenty-First Century: Globalization, Super-exploitation and Capitalism’s Final Crisis” (2016), quite big on off-shoring, but never giving a concrete measure of the relative importance of one or the other.

    However I put up a BLS-based chart that shows the decline in manufacturing jobs in the US in a pretty diagonal straight line down beginning well before off-shoring became a thing, well before NAFTA. Basically the manufacturing workforce peaked in the 50’s. So there is always some pressure through competition to displace labor with automation. Offshoring is merely a dependent alternative to automation – reduce the labor bill with cheaper labor, not displacement. It’s not “one or the other”.

    Technological determinism aside, a fetish is made of automation in the media because they know there is no answer that doesn’t conclude with the elimination of capitalism, and that answer is out of bounds. Hence it is deployed literally as a deus ex machina that ends social debate. But clearly the question of a living income has become separated from that of productive labor.

  17. Paid Minion

    One might say that manufacturing employment started declining, when we allowed non-reciprocal “free-trade”; access to our markets, in order to enable some other geopolitical goal.

    Going something like : “Sure, go ahead and let the Japanese and Germans export their cars to our market. It will help their economies, and we’ll never notice the difference. Besides, even if they didn’t have various ways of restricting our exports, the size of their markets aren’t worth exporting to……”

    Then in the 70-80s, it was “Sure, lets help all of our Allies develop an aerospace industry, and build their own F-16s. “Offsets”? No problem. No sacrifice by US workers is too much in order to fight the “Red Menace”, and promote “Free Markets” “Democracy”, and improve the standard of living over there..”

  18. Johnnu lunch Box

    Millions of jobs go to Mexico and millions of Mexicans come to usa and send their millions in wages home to support their families. Meanwhile Politicians continue with Rectal Crainial Inversion while drawing huge salaries. When will the revolution begin?

  19. Sluggeaux

    Class-hatred has been simmering in the U.S. throughout its entire history, and it manifests itself today in the anti-Americanism of our greedy elites, who would prefer to profit from the exploitation of foreign labor over living in a just and equitable society. Germany and Japan benefitted from losing the War, from Cold War trade policies that allowed them to rebuild on exports to the U.S. (subsidized in many cases, such as by container ships returning from Vietnam via Yokohama), and the creation of a manufacturing culture that continued to value workers even as their wages rose. Americans in the credentialed classes became obsessed with rock-star lifestyles, epitomized by Slick Willie bragging that his first date with Hill in 1971 involved crossing a union picket line to scab at the Yale Art Museum in order to gaze at a bunch of vacuous Rothkos. But watch out — class-hatred is a two-way street…

    Chicken and egg, Lambert. Stock manipulation increases the power of the 1%. I also yell at the TV “news” — probably because I didn’t have one either between the critical developmental ages of 18 and 23 — so “news” broadcasts are not allowed in my house.

  20. TheMog

    It’s not all roses and unicorns either in Germany. There is outsourcing going on as well – for example both BMW and VW manufacture cars for the US market in the Southeastern US (IIRC both in Spartanburg, SC).

    Yes, Germany does have a better education system for apprentices etc plus it is still socially acceptable to become an apprentice in a trade and not go to college. BMW is trying to establish something similar around Spartanburg, but apparently with mixed success. Dan Rather did a segment on this effort a few years back and interviewed a bunch of parents who said something along the lines of “nice idea, but it’s for other people’s kids – ours have to go to college”.

    Another thing to keep in mind is that large German manufacturing companies still tend to have pretty strong union representation, which of course is sorely missing in the US.

  21. Mitch Ritter

    Two words missing from Union Reps and Wage Slaves ourselves as we flail away while falling backwards, “SOCIAL CONTRACT.” Our backwards free fall from stable middle class growth and access and attainment to higher education has been precipitated and pushed by a broadcasting system and cyber platforms that have excluded the VOICE OF WORKERS ever since the first newspaper carried a BUSINESS section with no LABOR section.

    Through the various historical attempts to insulate some small sliver of broadcast spectrum from advertiser pressures and market forces. Those various historical attempts now the strictest taboo on content, even stricter than sexual predation and violent aberration which comprise much of the broadcast content. Yet when or where can we find a broadcaster in the U.S. addressing issues of structural media reform to insulate some national resources from the POLITICAL E-CON-o-my that grants them to the the highest bidder.

    As media scholars Robert McChesney and John Nichols have pointed out in a number of their book-length studies on this taboo U.S. history of mass media: One of the first national radio networks was designated for LABOR, there were multiple EDUCATIONAL networks and this has nothing to do with IDENTITY LABELS used to divide U.S. like Conservative or Liberal, however these shifty terms are defined. A well-rounded human has both aspects and more within them depending on circumstance, context and situation being addressed.

    Another designated non-commercial broadcaster was the CATHOLIC CHURCH whose leaders were actively concerned with the use of public airwaves by Advertising Agencies using sales tactics to habituate dangerous past-times (like alcohol and tobacco) and were driven by seasonal fashions rather than values and verities such as the bible and catechism’s preponderant calls to address the needs of society’s most disadvantaged. Or to beat weapons into plowshares and sit under a fig tree and reason together (Isaiah) rather than to use fear to keep subsidizing the worlds largest distributor of weapons and its stealthy and steely profiteers.

    Sad day when the few token representatives of U.S. Wage Slaves cannot even be counted on to voice a DEMAND much less to insert the concept of SOCIAL CONTRACT that extended humane and practical DEMAND-DRIVEN\SUPPLY LINE insights into our materialistic society’s wealthiest distributors of hate and divisiveness such as Henry Ford, who while stoking anti-Semitism and disparaging independently organized labor for his MASS PRODUCTION facilities, eventually realized that if his impoverished work-force was ever to constitute the potential internal markets that became the Post WW II envy of the world, those workers would have to be paid more than slave wages, be granted access to long-term capital to purchase big-ticket items and our growing internal markets within the lower 48 states would require careful regulation and controls like tariffs and capital-flight restrictions that would protect our enviable internal markets. Nowadays whenever PROTECTIONISM is demonized by both Fair & Balanced Journalists and their Golden Rolodex of E-CON and Bid-Net experts there is nobody to note how our own late-developing working middle classes grew from the Age of the Robber Barons in which the U.S. was as feudal a society as Europe’s with simple substitution of the Captains of Industry for the monopolistic and conservative royal Anglo and Euro monarchs whose crown-chartered legal anti-trust fictions dba EAST INDIA TRADING COMPANY or HUDSON BAY TRADING CORPORATION.

    Our founders rebelled against these Conservative Royal Feudal Monarchs and their Royally Chartered monopolistic Corporate Legal Fictions by dumping such product into every available cartel-controlled mercantile harbor. PROTECTIONISM was what allowed our states to form that most enviable of internal national markets and prevented our SOCIALLY CONTRACTED WORK FORCE from being forced to compete against cheaper off-shore or south-of-the-border slave labor that formed the same COMPETITIVE ADVANTAGE now taken for granted when a subsidized start-up like NIKE decides to pursue a business model that relentlessly exploits North American running shoe and sports wear market needs by cheaply manufacturing such products off-shore via contracting agents exploiting captive Indonesian (substitute other Latin American, African or Asian ENTERPRISE aka FREE TRADE ZONES) slave laborers.

    If we aren’t worth hiring at a sustainable SOCIALLY CONTRACTED WAGE aimed at developing our national resources, we should reject buying from such nationally suicidal business models and corporate LLC fictions even if they can pay-2-play legislation that removes the PROTECTIONS. We vow to never sacrifice NATIONAL SECURITY, so why have we allowed the PRIVATIZATION of our NATIONAL SECURITY STATE by corporate legal fictions? A revealing if not all-encompassing historical answer to that question is another corporate-captured and regulatory-captured Mass Media Taboo discussed one time to my knowledge on the PEOPLE’S AIRWAVES. Search Bill Moyers panel discussing the LEWIS POWELL MEMO TO THE NATIONAL CHAMBER OF COMMERCE and the Nixon appointment of LEWIS POWELL to the Supreme Court, despite his total lack of judicial experience.

    {Creative Commons Copyright}
    Mitch Ritter Paradigm Shifters
    Lay-Low Studios, Ore-Wa
    Media Discussion List

  22. herkie1

    FELTNER: These companies are leaving to exploit cheap labor. That’s plain and simple. If he can change those trade policies to keep those jobs here in America, that’s what we need. We need American jobs, not just union jobs.

    And thus we circle back to finding a way to keep manufacturing jobs in the USA. The comment by Feltner is correct, but the solution of keep jobs in the USA using more expensive labor simply means more expensive products. That is fine if you are in the top 10% and can pay anything for your purchases, but I am on a fixed income and cannot afford to pay more for anything without a 1:1 drop in my living standards.

    The real macroeconomic problem is all, I repeat – ALL – new income after inflation generated by the macro economy since Bush II took office has gone to the top 10% of households by wealth. Why does NOBODY else seem to understand that you cannot run an economy without money? And the Main Street economy is strapped with 10’s of millions having fallen out of the middle class even as their paper assets like home equity were stolen by the financialization of the USA and the stockholders that own the Wall Street economy.

    The data coming out of the government/fed is a work of total fiction, inflation has been galloping (at least here in Oregon) at double digits since Jan 2014, rents alone are up 75% since then. Food at least 40%, both auto and healthcare insurance at least 40%, just to name three items, even a sandwich at a fast food join is nearly 100% higher than start of 2014 here. Del Taco raised it’s menu prices in July by over 100%. Companies do not do that in disinflationary eras such as we are assured have existed since 2010. My veteran’s disability/SS had it’s first COLA increase in a while for 2017, social security disability went up $3, that is not a typo, my rent has gone up from 725 in December 2013 to $1,250 in Jan 2017 while my benefit has risen for next year by THREE dollars.

    I considered myself middle class, just barely but above working class/poor, as recently as 2014. Now I am leaving for Australia on a one way ticket in 3 weeks, if I had not been invited there by a friend I would have had to give notice at this place anyway in order to live in my vehicle. Inflation is so wildly out of control that anyone taking home less than 40k a year here now needs a roommate. Is this metro Portland? No, it is far southern semi rural Jackson county hundreds of miles from the nearest major hub.

    So any analysis of economic conditions in the USA have got to start with recognition that the cost of living has risen OVERALL by as much as 40-50% just in the last very few years.

    WHY DO YOU THINK POPULISM RAISED IT’S VIRULENT HEAD THIS ELECTION CYCLE?

    People are angry, they are broke, living paycheck to paycheck, using payday loans to feed their kids, and the entire media and government refuse to recognize price increases because those increases do not fit the Feds or government’s economic models that allowed for negative real interest rates and the historic borrowing by the congress. Inflation is as bad as it ever was in the 1970’s but we are told there is no inflation and so if we are not making ends meet it simply has to be a personal failing, bad habits, or profligate spending when I know for my part I have cut back on absolutely every thing I can including heat. It is not a personal failing, it is being lied to by the powers that be.

    Seriously, until the contributors at Naked Capitalism finally recognize the house on fire inflation for every item you must purchase (except gasoline and flat screens) there really is nothing here worth reading.

      1. herkie1

        Do you know anything at all about economics and finance? If so you will understand that without a stable currency and truthful posting of inflation all other data is MEANINGLESS.

        You cannot even know what the real interest rate is without an honest assessment of inflation, so there is NOTHING in economics that makes any sense till we get real reporting of the inflation data. And, this has a social impact that Wall Street and the government ignore. Without honest reporting we have populist uprisings. It will tear the nation apart.

  23. Altandmain

    The answer is that the very rich are waging class warfare and are looking for anything to absolve them of responsibility.

    If automation were responsible for unemployment, then productivity figures would be soaring. Dean Baker notes that productivity has been rising at half the rate over the past decade at just 1.5% per year, compared to 3% between 1947 and 1973.
    http://cepr.net/publications/op-eds-columns/the-job-killing-robot-myth

    People need a restitution for the outright looting of society from the rich. That’s about it.

  24. Pete Prunskunas

    “Ever Hear of Germany?”

    You missed some. German companies, but also those of other European countries, generally have a seat on the board for unions. The adversarial model of management versus unions is not so common.

    China has stolen a great deal of technology from Germany because it has (had?) the most advanced industrial technology in the world. Read the below articles from Der Spiegel and you will understand. Essentially, Germany is what the U.S. was in the 1980s before the various presidents, both left and right, starting with Nixon, sold us down the river.
    – “Product Piracy Goes High-Tech: Nabbing Know-How in China”
    – “Harmony and Ambition: China’s Cut-Throat Railway Revolution”
    – “Beijing’s High-Tech Ambitions: The Dangers of Germany’s Dependence on China”

    And the following is from CNN/Money, “How to save U.S. manufacturing jobs”: “High wages can’t be the culprit, because wages in U.S. manufacturing are not especially high by international standards. As of 2009, 12 European countries plus Australia had higher average manufacturing wages than the United States. Norway topped the list with an average manufacturing wage of $53.89 per hour, 60 percent above the U.S. average of $33.53 … Moreover, the United States lost manufacturing jobs at a faster rate since 2000 than several countries that paid manufacturing workers even more. Among the 10 countries for which the Bureau of Labor Statistics tracks manufacturing employment, Australia, France, Germany, Italy, the Netherlands and Sweden both had higher manufacturing wages and lost smaller shares of their manufacturing employment than the United States between 2000 and 2010.”

    Not to mention Germany’s apprentice system, which works really well.

  25. baldski

    Stock buybacks create inequality. If you dig down into the 0.1 percenters, you will find that 62% of their ranks are filled by CEO’s, COO’s, CFO’s, and ex CEO’s, etc. They are the problem.

  26. sierra7

    In a global economic system “class” warfare is inevitable.
    The global idea of the economic system has been growing for centuries; it is most natural.
    If the “worker” class wants to improve themselves or have a “seat at the table” they have to learn how to fight all over again.
    Another commenter mentioned the “social contract”….that contract has been bludgeoned to death by global capital. And, not enough of today’s “worker class” even is aware of such a compact, let alone understand it.
    Nothing economical that has been “gained” over the last 100 years has been given to anyone. Every little step of improvement has been fought out in the streets, on the “shop floor” or even in the homes of the workers themselves.
    Lots of blood has been spent for those simple gains.
    If there are a billion decent jobs in the world, and then over just a few decades so many of those billion jobs are spread among the other 5-6 billion workers, what does anyone think is going to happen??
    There will certainly be a lower level of economic improvement for everyone.
    I personally don’t mind if someone makes millions; it is contrary to my calmness when it is done with so much murderous greed and so many revel in the destruction not only of lives but much more…..like our education system; our environment (who gave permission to any business entity to destroy our environment just to make more profit? Who?); our infrastructure; etc…you get the point.
    Capitalism is a game. Games need “rules”. The rules have to be on a level playing field. A fair system of justice has to be part of the game to enforce those rules.
    The rules that had at least corralled the most egregious destructive part of the game worked for may decades; those rules have been decimated, hence this mess we have now.
    The monied class of this country (and of others as well) will be astounded, shocked and fearful when the common folk come for them with pitchforks.
    We don’t have much time to come up with better solutions.

  27. Sean

    Two Big Thoughts.

    A) If you believe we are past peak “stuff” (Scott Sumner seems to indicate strong data that people are statiated with material goods) then every country can not be Germany. As we are a bigger economy than Germany then simply switching to their model which lead to the world producing too much “stuff”. People want service goods now. I don’t think we can take enough market share in manufacturing without possible causing a global recession where manufacturing is over produced world wide.

    B) Stock market is a closed system. Every dollar put to buybacks means someone else is a seller of stock. That means retirees or hedge fund managers or pensions are selling stock into that bid. Those guys then have cash that goes into something – Demand, other investments (VC/PE for example). The money still ends up somewhere. Its not like buyback dollars just disappear. A lot of it ends up into investment somewhere else in the economy.

  28. Estproph

    Late to the game here, sorry…

    Why would anyone believe that they would move to Mexico because of automation when Mexico is known to have a much lower wage rate in the first place?

    My car broke down. To fix it, it needs a diagnostic run on it using a computer available only at the dealer or a certified mechanic. So I’m going to have my brother in law fix it. He works cheap but doesn’t have the diagnostic equipment. That’s why I will have him do it, for the diagnostic equipment.

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