Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Financial Crisis Page 1 of 12

Big Picture Financial Collapse

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On August 5, 2024

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Though newer readers will be forgiven for disbelieving it, during my early online career I was primarily considered a finance and economics blogger, though I’d write about almost anything. Among other things, I predicted the financial collapse, including the DOW bottom and the month it would happen in. A correspondent once went thru the Wayback machine and found that there were less than forty people who made the prediction in advance.

I lost interest somewhere around 2010 and moved my primary focus to other topics: at the time mostly ideology and how it interacted with the political economy. There was no reason in continuing: my goal had always been change, and the Fed, Congress and Obama had all confirmed that the only change was to be the end of any real spar of capitalism.

So I’m not going to write about the proximate cause of the current financial collapse, but instead look at the bigger picture that lead here.

First we have the offshoring of real industry, primarily to China. There is a real economy, and financial skyscrapers, no matter how high, are based on them. The bottom line is that the West no longer has the industry to hold up the skyscraper.

Second is that the 80-now long bull market was entirely a creation of government policy: mostly thru the Federal Reserve, but with serious assists from Congress and the President. There was a time when stock buyback were illegal, for example. There was a time when the Fed didn’t run a “the markets must always go up” policy: in fact, during the 50s and 60s the stock market traded sideways, even though real economic growth was, by every measure, higher than in the post 80 period.

Third is the response to the 2008 financial collapse. Not the collapse itself, but the response, which was to bail out the people and institutions which had caused the crash, to immunize thru fines and agreements those who had engaged in massive and widespread fraud, to force the burden onto homeowners by allowing banks to steal houses; and in general terms to ensure that the same people who had caused the crisis were in charge afterwards, but more powerful and controlling larger institutions.

Then they patted themselves on the back and said they’d saved the world. Capitalism isn’t a system I like, but one of its virtues is that if you fuck up you go out of business: if you’ve made a lot of bad decisions you aren’t allowed to keep making bad decisions. Bernanke, the Fed, Congress and the Presidency put an end to that dynamic and essentially ended even the shadow of real capitalism in America, and indeed, in the West.

This meant that resources were terribly misallocated, and that further economic decline was inevitable, since there was no possibility of a new economic elite rising based on actually producing good products and solving real problems. It also mean that further financial crises were inevitable, and that in the end those crises would not be able to be papered over, because, Virginia, there may be no Santa Clause but there is a real economy where things have to actually be made and built and grown and dug up and refined.

The fourth factor is the decline of US dollar hegemony. It isn’t obvious in the numbers yet, but it’s real and those who are making long term bets against it will regret doing so. I won’t go on about this, since I’ve written a dozen articles or so on the topic in the last two years.

We’re at the end of somewhere between two and five centuries of European/Western world superiority and dominance. It’s going to suck for Europe, the Anglosphere and most of our allies. There’s just no way around that, and the decision points are past. A recovery is theoretically possible, and I could even write an article giving the outlines of what’s necessary, but there’s no political possibility of doing it and our current elites are too incompetent to make it work anyway. A revolution which throws out our entire leadership class is a pre-condition and by the time we got that done, the day would have passed anyway.

All of which is, I suppose, just a long way of saying “economic decline sucks and isn’t going to stop,”

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Why Economists Are Wrong About How Good The Economy Is, And Regular People Are Right

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On October 30, 2023

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Practically every day I read an economist like Paul Krugman or Brad DeLong talking about how the economy is the best ever, but ordinary people just don’t get it, and must be idiots influenced by propaganda.

Someone’s an idiot on this subject, but it’s not ordinary people.

Mish Shedlock had a good article on medical inflation. Here’s two charts from his article. First, costs:

Second, CPI for medical:

You might be noticing a—slight disconnect. The cost of medical care services (which is what you care about as a patient) are dropping, according to the Bureau Of Labor Services (BLS).

Mish has the extended explanation, and you should read his whole post.

Now, back in 2020 I wrote an article on how inflation statistics are bullshit. One example was automobile costs. Here’s the chart from that.

Yeah. right.

The inflation statistics, at the this point, are complete bullshit. Absolutely worthless in entire categories.

When it comes to how good people feel two things matter: how many people have a job, and how much money they’re making. When economists look at wages, they look at “inflation adjusted wages.”

How much your money buys. So, since the inflation numbers are garbage, the inflation adjusted wages are garbage.

A long time ago Stirling Newberry gave me a rule of thumb, which is that people are fooled in generalities but not in specifics. Which is to say, people know what hurts or feels good in their own lives, though may be completely clueless about the generalities. But when you take a survey asking people how the economy is doing, what you’re really asking is “how does it feel for you and people you know.” The answer is “shitty.”

I’ve personally seen, in Toronto, Canada, foodprices increase at least two-thirds. If I buy the shopping basket I bought for $30 in 2020, it now costs me about $50. A lot of things have doubled in price. Rent is way up for most people.

And when I talk to other people, no matter where in the US or Canada they’re from, I hear the same thing. So I’ve never believed the BS talk about the “best economy ever.”

Back in the 90s, there was a rather good book titled, “Economists are bad for your health.” Economists are clueless. North of 99% of them missed the 2000’s housing and financial bubble, for example. The advice they give on how to run economies is almost always not just bad, but terrible, at least for 96% or so of the population.

The most important requirement to understanding the world is accurate perception. Truth, if you will. If you don’t know the truth, you’re going to draw the wrong conclusions. Economists believe BLS stats, so they’re full of it. Add to that the fact that Economics as a discipline is mostly wrong about almost everything macro, and economists are out to lunch in a very dangerous way.

(Note that I predicted the financial crisis, publicly, in advance and spent years before that writing about the bubbles. All the necessary information was available, if you didn’t think nonsense like markets being self-regulating and housing prices always going up. A correspondent once did a search to find out how many people predicted the crash in advance. He found 39. Where were all the economists, who are supposed to understand the, well, economy?)

Anyway, ordinary people are right. Their wages haven’t increased enough to make up for the increases in key prices. You can skip on a lot of things, but not food and shelter, and skipping on medical services is bad too. As for autos, well, most people need them or they can’t get to work or go shopping.

We have late imperial disconnect: the elites live in a world where everything is great, while ordinary people live in the real world, and it sucks.

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Delusion Regarding the Fall of Neoliberalism and Globalization

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On September 25, 2020

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So, the article below was published December 8th, 2015.

The pull quote is:

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

Nothing has changed, the process has simply continued. Notice the repression going on in the US right now. Since I wrote it, the UK left the EU, there was massive resistance to Macron in France, and so on. We have massive fires all over the world: Australia, California, South Africa the Amazon and more. Wealth continues to concentrate at the top, etc, etc…

These convulsions take time. Slap the start of the actual fall as 2020, with the UK’s Brexit, and we’ve got 12 to 20 years to go. This one’s going to be bad, really, bad, simply because of climate change and our vast over-exploitation of limited resources. There’s going to be a lot of real hunger and lack of water, and so on.

The next age is undetermined, but one possibility is a centrifugal period. It is hard to imagine a future in which, India, for example, survives as a unified nation. For that matter, I’m not sure I’d put my money on China holding together over the middle run: 50/50 it’s fallen into warlordism by 2050 to 60.

The simple way to make your guesses is ask if a country can feed itself with domestic production AFTER the effects of climate change. If it can’t even feed itself now (or only barely); or if it is going to have serious water issues (water, obviously affects agriculture, so it’s not really two things), then the smart money is that it’s going to break up or lose effective control of various hinterlands.

And if you’ve got resources a more powerful nation on your border wants, well, that could go very badly for you. (My fellow Canadians, who seem clueless about how violent Americans are, should take note here.)

On the upside, this will be a very interesting period to be alive, if you can stay that way.

Natalie Nougayrède writes in the Guardian about The Front National’s victory in France:

Marine Le Pen has no solution for France’s problems, her economic programme is all about retreating from the outside world and Europe. Her social vision is of a mythical, homogeneous France that never existed. What she has to sell is an illusion. It’s only because so little else is on offer that people are buying.

This analysis is, there is no kinder way to put it, delusional.

And Nougayrède should know it, because she writes:

The impact of globalisation marked the end of what the French demographer Jean Fourastié coined Les Trente Glorieuses (The Glorious Thirty), the 1945-1975 period when France was modernising and increasing its international influence. There is much twisted nostalgia in the rise of the National Front.

Nougayrède blames this on the oil shocks, which the entire West failed to handle (note that Japan, far more vulnerable to the oil shock, DID handle it. Their later failure had other causes). She notes that France’s elites have not, since 1975, been able to turn things around, something I have noted as well.

But she is wrong about a retreat from globalization being delusional. The simple fact is that in France and almost every other country (including, by the way, most African countries), growth was better before globalization, and the proceeds of that growth were distributed to their populations much more evenly.

This is a fact, and you can only argue against it by invoking China (which used classic mercantalist policies, and was not meaningfully party to the 1945-1975 consensus economy.)

There will always be trade. There will always be global movement in goods, capital, and ideas, but more is not always better.  In fact, one can easily argue that more is rarely better.

As for “Europe,” the fact is that increased integration has not been to the benefit of most Western Europeans. That assertion is, again, extraordinarily hard to argue against and is especially true of the creation of the Euro.

Nougayrède wants France’s leaders to fix things, and not to fail, but she is very nearly as delusional as them. She admits that their failure has led to the rise of Front National, but cannot admit that their policies have failed, economically, along the lines that Marie Le Pen says they have.

Just because someone is a near-Fascist does not mean they are wrong about everything. I have no tolerance for LePen’s brand of Imperialism and cultural supremacy, but she, like Trump, is telling a lot of truths to a lot of people who feel like their country has been on the wrong track for a long time. (In the U.S., white, working class male salaries peaked in 1968. No matter how much you scream about white privilege, you are a fool if you expect white males to gravitate towards anyone who doesn’t at least pay lip service to reversing that.)

As an economic project, the EU is a failure for many of its members, including France. There are exceptions (Germany, Poland, etc.) but the losers cannot be expected to just sit there and take the beating forever. The “beating” has been exacerbated by Europe’s deliberate imposition of austerity. It is not just that Europe’s elites have failed to create a good economy, it is that they have deliberately made the economy worse for the majority of residents in many of its countries.

Until we can honestly evaluate the failures of neo-liberalism, and gut globalist cant which claims more trade and capital flows are always a good thing (and, even if they aren’t, are “inevitable”) we cannot fix the economy.

France, like about half of the EU, should leave the Euro. It should re-impose tariffs on a wide variety of goods and produce them in their own countries. Yes, they would cost more, but wages would be higher. It should also move radically to non-oil-based energy (as is true of, well, almost everyone).

These basic policies are not difficult. Corbyn is not wrong to say “make the necessary adjustments so it will work today, and go back to post-war policies.”  It failed,  yes, but it was the last economy which spread money evenly through the economy.  Make sure it’s not sexist and racist, update it for new energy technology, and try it. It may not be the best solution (I’d like some fairly radical changes), but it’s certainly not crazy, given that it did give France those 30 great years.

The failure to deal with the oil price shock doomed the post-war world, yes. But it is 40 years later and we have technology and knowledge they did not have.

Until the developed world’s sanctioned intellectuals (as opposed to pariahs like myself and my ilk) and their masters come to grip with these facts, the population will continue to turn elsewhere. They may turn to sane and reasonable people like Corbyn, or they may turn to people like LePen and Trump, but people will not put up with “it’s going to get worse for the forseeable future” forever.

We can have reasonable policies, which will make the world better for everyone (even if that means there will be a lot less billionaires–the Corbyn solution), or we can have the rise of fascists and their left-wing equivalents.

The room in the mushy middle for those who aren’t willing to do something radical to fix the economy and other problems is narrowing. It will continue to narrow.

Our current elites will not adjust, so the question is: Who will we get? Corbyn and FDR? Mussolini, LePen, Trump?

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

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What Negative Interest Rates Mean and What We Should Do

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On August 21, 2019

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Alright, so Germany has now introduced a zero interest bond. That means, given inflation, people will get back less effective money than they started with.

At this point, outside the US, the average interest rate is negative.

As Stoller pointed out, that means that people with money can’t figure out anything productive to do with it which will make a profit.

That means that capitalists and banks, including central banks, have failed. It is their function, in a capitalist society, to allocate resources. Money represents resources: people, stuff, and land.

Now if we lived in a utopia, with no real problems, this would make sense, but we don’t. There are tons of real problems which need solving, lots of money floating around, and other capacity indicators show there are people and resources which are not being used, or which could be redeployed.

So capitalism is failing to do what it’s supposed to do, and so are capitalists.

The correct action in a situation like this is to get that money working. The government could borrow it massively, and do what needs to be done. It could (and I would suggest this is the better option) tax it away, and then spend it.

If capitalists absolutely insist on private enterprise doing the work, then they should massively raise taxes on any income or capital gains not used productively, and not count less productive things like loans–they should stipulate that the money must be invested into business activity. They should make stock option grants, stock buy-backs, and all similar activities intended to allow cash-outs impossible. They should get rid of private equity; just make it illegal. Almost all of its activity destroys viable business to create a pay day for a few people.

Heck, you should do away with all those things anyway.

People are very confused about profit. Profit is mostly socially constructed. It is not an independent variable. Taxes, laws, and regulations determine what is profitable and what isn’t. Billions of subsidies, tax breaks, and favorable land deals make extraction industries profitable, for example. Banks get to print money. Media companies like Disney rely on characters and ideas which, in the past, they would long have lost control over. Companies are allowed to pollute for free, to use vast amounts of water for nominal prices, and so on.

Meanwhile, a vast array of regulations and nickel and dime costs makes it impossible for small business to compete. Try starting a bank. Yeah, good luck with that.

This, too, is by design. Before Reagan, regulations were set up to make small businesses easier to start and keep running.

The point is that if investors can’t find anything in which to invest, government has failed to tweak profits correctly. You shouldn’t get rich in land speculation unless you’re building stuff that should be built. You should get rich in alternative energy, but mostly you don’t. You should get rich in making homes that are healthy and energy neutral, but instead we keep building unhealthy and environmentally-degrading housing.

You should make money rebuilding infrastructure, or building high speed trains, or reducing carbon, or reforesting, or making fish and phytoplankton stocks recover.

Yet, you don’t, so these things which need to be done in order to, like, avoid a few billion deaths, don’t get done.

That’s government failure.

Capitalism does not work without effective government control, if it is the dominant economic mode in a society.

So. We have lots of stuff that needs to be done. We have lots of resources and money which aren’t doing those things and, indeed, resources and money which apparently can’t find anything to do

Only a moron can’t look at those facts and know what to do.

Oh, and the 2008/9 bailouts made this situation far, far worse than it should have been. This endless printing of money is only to keep the useless rich afloat when they serve no useful, productive function. They are actually counterproductive, as they are actively stopping productive activity from happening.

Tax them. Stop propping them up and let incompetents die. Destroy, utterly, those members of the ruling class who are actively destructive, like Private Equity. Alter the rules so that productive activity is profitable, and while you’re doing all that, just have governments do the most important stuff themselves, with negative real interest rate loans.

None of this isn’t obvious to anyone who pays any attention.

Yet we don’t do it, because governments have been captured by failed rich people.

Normal. But not acceptable when the cost of inaction could be billions of dead people.

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Why We Need to End Banks and Shadow Banks

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On August 8, 2019

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Banks and various other financial companies have one important privilege: They can create money. When a bank lends you money, they don’t take it from another account and apply it to yours, they just put a number into a ledger, and voila, the money exists, created as debt.

Now, there are those who argue that creating all money as debt is stupid, but let’s move on from that and emphasize the important point:

Banks and other financial companies create money out of thin air.

Now, there are various caveats, and the amount they can create isn’t unlimited (though for practical purposes it’s close), but this is the bottom line.

They then get paid back by the people they loaned money to on money they created out of thin air.

It takes a special sort of genius to run a business which can actually create money, yet still lose money.

This chart gives an idea of how much genius:

I mean, you create the money out of nothing, and then you charge 17 percent returns (which underestimates the real rate of return, because of all the charges), and you still manage to cause a financial crisis because your liabilities wind up higher than your assets?

Wonderment aside, let’s circle back to the ability to create money.

Let’s say you’re Joe, guy who wants to start a business or buy a house. You go to a bank, and the bank decides whether you can do that.

Banks have the ability to create money in exchange for doing something: They decide who should get to do things. They give permission.

If a bank lends you 5o million, that’s the right to command 5o million dollars worth of other people’s labor: To hire them, or to buy the goods created by them. You get to choose what those people do.

Resources, especially people, aren’t infinite. Banks choose who gets to use them. The deal, spelled out is, “Give us the right to create money, and we’ll choose the people who do the most good with society’s resources to control those resources.”

And the banks have failed–over and over again they’ve failed. They don’t even actually make their returns (see 2007/8), let alone actually make good choices about how we should use our resources–with labour or other limited resources. I trust I don’t need to spell all of this out: Look at ecological collapse, climate change, and so on.

So banks, in their current form, shouldn’t have this incredible privilege, because they’ve repeatedly used it badly. This isn’t the first time, or even the second, or the tenth. Among others was the collapse of 1929 and the Great Depression, which effectively caused WWII. We thought we’d fixed the banking sector after that, and we were wrong, because rich people bought out government and undid all the fixes put in by FDR and the New Dealers.

So banks can’t be fixed, they do near apocalyptic damage, plus they suck at their actual job.

We need to find another way to give people permission to use scarce resources, including other people’s labor.

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Why the Economy Is Bad for Most People and How to Make It Better

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On June 10, 2019

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This is the second collation of articles on why our world is what it is, and how we can change it. Some of these articles are old, as I don’t write as much as I used to about economics, mostly because the decision points for avoiding a completely lousy economy are now in the past. The last decision points were passed by when Barack Obama announced his economics team and refused to try and get rid of, or bypass, Bernanke to enforce decent policy on the Federal Reserve.

However, this economy was decades in the making, and if we do not understand how it happened we will only wind up in a good economy through accident, and, having obtained a good economy, will not be able to keep it. These articles aren’t exhaustive; a better list would include almost five centuries of economic history, at least in summary, and certainly deal with the 19th century and early 20th centuries.

I was heartened that hundreds of people read the articles linked in my compendium on ideology and character so I dare hope that you will, again, read these pieces. If you do, you will walk away vastly better informed than almost anyone you know, including most formal economists, about why the economy is as it is.

The Decline and Fall of Post-war Liberalism

Pundits today natter on and on about income inequality, but the fundamental cause of income inequality is almost always determined by how society distributes power. As power goes, so goes income–and wealth. The last period of broad-based equality was the “Liberal Period,” which started with the Great Depression. You can locate the end of that era at various points from 1968 to 1980, but 1980 was the point at which turning back became vastly difficult. This was the moment when a new political order was born; an order conceived to crush those who were willing and able to fight effectively for their share of income and money.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

Why Elites Have Pushed “Free Trade”

Those who are middle-aged or beyond remember the relentless march of free trade agreements, the creation of the WTO, and the endless drumbeat of propaganda about how FREE trade was wonderful, inevitable, and going to make us all rich. It didn’t, and it was never intended to. Fully understanding why “free trade” has only enriched a few requires understanding the circumstances required for free trade to work, the incentives for free trade, and the power dynamics which make free trade perfect for elites who want to become rich (often by destroying the prosperity of their own countries). Free trade is about power, and power is about who gets how much.

The Isolation of Elites and the Madness of the Crowd

All societies change and face new challenges. What matters is how they deal with new circumstances. The US, in specific, and most of the developed world, in general, is in decline because of simple broken feedback loops. Put simply, ordinary people live in a world of propaganda and lies, while the rich and the powerful live in a bubble, isolated from the consequences their decisions have on the majority of the population, or on the future.

The Bailouts Caused the Lousy “Recovery”

This may be the hardest thing to explain to anyone with a connection to power or money: The bailouts are WHY the world has a lousy economy, not why it isn’t even worse. If people cannot understand why this is so, if they cannot understand that other options were, and are, available, other than making the people who destroyed the world economy even richer and more powerful, we will never see a good economy, ever again.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

The Rapid Destruction of Countries

You may have noticed, you probably have noticed, that most countries are becoming basketcases faster and faster. Some are destroyed by war and revolution, others by forced austerity. However it happens, the end of anything resembling a good economy through austerity in places like Greece, the Ukraine, Italy, or Ireland, or through war, in places like Lybia and Syria, is sure. Understand this: What is done to those countries, is being done to yours if you live in the developed world, just at a slower pace–and one day, you, too, will be more valuable dead than alive.

Why Countries Can’t Resist Austerity

Many of you will realize that much of the answer to this is related to the article on free trade. Weakness, national weakness, is built into the world economic system, and done so deliberately. The austerity of the past six years is simply the deliberate impoverishment of ordinary people, for the profit of elites, on steroids. But it is worth examining, in detail, why countries can’t or won’t stop it, and what is required for a country to be able to do so.

Why Public Opinion Doesn’t Matter

We live in the remnants of a mass society, but we aren’t in one any more (though we think we are). In a mass-mobilization society with relatively evenly distributed wealth and income, and something approaching competitive markets, public opinion mattered. If it was not a King, well, it was at least a Duke. Today it matters only at the margins, on decisions where the elites do not have consensus. Understand this, and understand why, or all your efforts to resist will be for nothing.

The Golden Rule

Money, my friends, is Permission, as Stirling Newberry once explained to me. It is how we determine who gets to do what. He who can create money, rules. This is more subtle than it seems, so read and weep.

It’s Not How Much Money, It’s Who We Give It to and Why

We have almost no significant problems in the world today which we could either not have fixed had we acted soon enough, or that we could not fix or mitigate today, were we to act. We don’t act because we misallocate, on a scale which would put Pyramid-building Pharoahs to shame, our social efforts.

Higher Profits Produce a Worse Society

No one ever told you that, I’m sure. Read and learn.

The Fall of the USSR

The USSR fell in large part because of constant and radical misallocation of resources. This misallocation occurred because those running the economy did not receive accurate feedback. Despite the triumphal cries of the West and the managerial class who pretend to be capitalists, a version of this exact problem is at the root of our current decline, and it would serve us well to understand how and why the USSR fell.

What Privatization Does

Of all the ideological bugaboos of our current age, one of the strongest is the idea that private enterprise is always more efficient and better. It’s not, but that belief is a very profitable to our elites, and understanding how the engine of privatization works is essential to understanding both our current economic collapse and how the fakely-bright economies of the neoliberal era–especially the early neoliberal period of Thatcher and Reagan–were generated.

What Prosperity Is and Isn’t

It is, perhaps, odd to put this article so far down the list, but it’s wonky and important and not very dramatic. Simply enough, what we define as prosperity is not prosperity, which is why we are sick, fat, and unhappy with rates of depression and mental illness and chronic disease which dwarf those of our forbears despite having so much more stuff. Fix everything else, but if we insist on continuing to produce that which makes us sick and unhappy, what we have will not be what we need or want, nor will it be, truly, prosperity worth having.

The Four Principles of Prosperity

Prosperity, at its heart, is an ethical phenomenon, as much as it is anything else. Without the right ethics, the right spirit, it will not last, nor be widespread. If we want a lasting prosperity, which is actually good for us, we will start by reforming our public ethics.

How to Create a Good Internet Economy

The internet is wonderful, but despite all the cries of “Progress, progress!” it has mostly made a few people rich, created a prosperous class of software engineers who often lose their jobs in their 50s, and has simultaneously overseen the decline of the prosperity for most people in the developed world. It has not produced the prosperity we hoped it would. Here’s why and how to fix it.

Concluding Remarks

The above is so far from comprehensive as to make me cry, but it’s a start. I do hope that you will read it and come away with a far better idea of why the economy sucks for most people, and a clearer understanding of the fact that it is intended to suck, why it is intended to suck, and how the old, better economy was lost.

(Author’s Note: This was originally published October 6, 2014. I’m putting it back up top, as I have gained many new readers since then.)

Yellen’s Legacy Is Doing Nothing that Mattered

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On November 3, 2017

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So, Janet Yellen has been replaced as Fed chair.

Her reign was meaningless, she just kept the trends moving as they were, and was essentially no help to ordinary Americans. Yes, she kept interest rates low, but that meant little; all that money flooded into corporate bank accounts.

I don’t want to slam Yellen particularly hard. The person who was in place at the time when a real change could have easily been made was Bernanke, and he decided to bail out rich people and let ordinary people sink. He is responsible, with Bush, Obama, and Geithner, for the continued decline and stagnation of the US economy, and for the damage to much of the world’s economy.

If Bernanke had done nothing but allow banks to go bankrupt and the government to take them over, with appropriate support, we would be in far better shape now, though the couple years after the financial crisis would have been worse.

Yellen? Yellen is a drone. She had no idea what to do, so she froze for years in the headlights.

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How Much the US Economy Has Recovered for Most Workers

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On September 10, 2017

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Basically, not at all.

Labor Force Participation Rate

So, around 1980, wages go off a cliff. Americans respond by increasing the number of two earner households, because from 1980 onwards, the Federal Reserve deliberately limits wage increases for most workers so they always come in under the inflation rate.

Then the 2008 financial crisis happened, and those jobs went away. Wages haven’t improved, for most people they are even or down.

In 2009, I predicted a collapse in incomes. I got it partially wrong. I held the labor force participation rate steady and expected reductions to come out of wages. Instead, the reduction came mostly from jobs just going away. (In retrospect this was a clumsy mistake.)

So, lately you’ve been hearing about how wonderful the economy is. It isn’t. It’s still shitty for most people and has been shitty since 2008.

Obama’s didn’t fix the economy. He froze it at approximately where it was after the financial collapse, minus a dead cat bounce, which is to be expected since he and the Federal Reserve and Treasury did everything they could to not allow price discovery to happen and to not allow capitalism to do one of the things it does well, when left alone: make bankrupt companies go bankrupt and wipe out bad loans.

Instead they made sure that companies and people who had caused the financial collapse, in most cases deliberately, were made whole and prevented from losing everything, while pushing the losses down onto homeowners who were minor participants compared to Wall Street and large banks.

This has played out as stagnation. It is exacerbated by a host of other issues, like monopolization, corruption and the declining era of oil, but at heart it is a simple refusal to let large, politically powerful actors take their losses and lose the economic power they misused.

Having done everything wrong from 2000 to 2008 except buy Congress, financial interests afterwards kept doing everything wrong except buying politicians, because they won big-time, and the most important rule of capitalism is: “If you’re making lots of money, keep doing what you’re doing.”

When making money is, in effect, guaranteed, capitalism stops working in anything close to a beneficial fashion.

This was, again, Obama’s decision. When TARP was first proposed it failed to pass and only did so because Obama bent arms, viciously, to make it happen. He was 100 percent on side with everything Bernanke did, and not only did nothing to stop him, but aided and abetted him in what were crimes by any reasonable definition of the word.

The economy is bad. It is has never recovered from the financial collapse, and it will not do so until both austerity and crony capitalism are dealt with.

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