Ian Welsh

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

Category: Economics Page 21 of 89

When You’ll Get a More Equal Society

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On March 10, 2021

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So, it seems that the salaries of junior bankers are being cut so that senior bankers can have bigger bonuses. At UBS, the average bonus for senior bankers is $2.1 million.

Niiiiice.

Unless you’re a junior banker. Or a customer.

A given means of production, combined with a resource base, will throw off some amount of surplus. That surplus is divided among the population based entirely on their power. Sometimes that power comes from scarcity, often managed scarcity as in the Medieval Guild system, or un-managed scarcity during the first decades of a technological change (hello, programmers!), but most often it comes out of the barrel of a gun, from the point of a spear, or from the edge of a sword.

In Against the Grain, about the rise of early kingdoms after agriculture, the author points out that in agricultural systems where the farmer produces a single major crop, it is really easy to take away all but the bare minimum for the farmer’s survival; you know how much land, how much rainfall, when the crop is harvested, and where the farmer lives. The farmers mostly can’t run away, and they can’t win a fight against professional warriors, so you can just take their crops. In the Middle Ages, there are accounts of knights fighting peasants who outnumbered the knights a hundred to one and the knights came out not just victorious, but with nothing but minor injuries. The peasants, well, they got massacred.

Our own society is similar. Bankers have, along with various adjacent industries and central banks (somehow given “independence”), a monopoly on creating money (which they create as debt). This monopoly, of course, is enforced by the government, and the government’s enforcement rests on men with guns (and, these days, a few women), plus prisons where they brutalize you. Opening a new bank is very, very hard.

Then, within banks, the seniors take most of the gains, as one would expect.

None of this would work without those men with guns and ugly prisons, though.

There are variations on this, of course. After WWII, when a huge percentage of the male population knew how to fight effectively in groups, why, by coincidence the deal was more even. When those men aged out, why, somehow the deal got worse. (This isn’t the only factor, but it’s a big one.)

Inequality tracks with force being unequal. When a few men are superior to a huge mass of other men, then inequality soars. The feudal knight was genuinely superior to peasants. Greek Hoplites were equal to each other, but ruled over a huge mass of slaves. The same goes for the Roman legionnaires — but notice the Equites (who could afford a horse to bring to the fight) had higher legal status and rights.

Mercenary armies and police, like most armies and police in the world, are wonderful for this. They’re loyal to whomever pays them. Most revolutions happen when there is a financial crisis for a reason.

So, get control of force and use it to control money/means of production, or get control of money/means of production and use it to create force. Obviously it’s really about some of both, but you use whichever one you have more of to get control over the other one. Wall Street bought DC so that it could have control over the police and courts, which is why Obama immunized them from their crimes and bailed them out — including from really raw and obvious crimes like illegally signing a document saying the bank owned someone else’s house. Absolute fraud and straight robbery: That’s what Obama made go away for the financial industry.

Some of those people who had their houses stolen, in a society with less police and military and nasty prisons, might have taken retribution and recompense into their own hands, but in the US, well, no, that’s really not possible. You might get retribution, but then the cops will imprison or kill you, which they didn’t do to the men who stole your house and probably your job, car, and future.

In raw terms, this is the situation in the US and a lot of other countries (certainly in Britain). A small minority has control over force and money, and as they feel more and more secure in their control of those two things, they take more and more of what the society produces.

The 2008/9 Obama and the Fed was a watershed incident. The rich had lost everything. Absolutely everything. It didn’t matter if they had “won” the bet like Goldman Sachs, because if I win a bet with you and you lose all your money, I’m fucked too. The Fed and other central banks bailed them out to the tune of trillions; Obama and other political leaders immunized them from their crimes (and the entire bubble was based on fraud), and our elites then KNEW, without a doubt, that they were in complete control and that they could do anything, and that the violent authorities would bail them out and protect them from their victims.

And that, my friends, is where we are now. There will be no significant downward redistribution until elites either lose control of the violent apparatus, or genuinely think they are about to, or can’t win their side of an oncoming revolution.

Or, of course, until the fact that there is a real economy and environment, and they aren’t just mismanaging it, but effectively burning it down to make money, causes an economic collapse where suddenly money can’t buy the mercenaries’ loyalty any more.

Fun time to be alive.

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Jackson, Mississippi in Third Week Without Water

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On March 4, 2021

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So, another mess. Even before this, much of the water was unsafe and probably lead-poisoned. There are no high-level talks between the State and the city — which is the State capital!

American un-development continues. What is also striking is the complete incapability and unwillingness to handle problems. It’s the third week and the state and the city aren’t in high-level talks? Meanwhile, this news has not gone national: There is no American effort to help Jackson, any more than there was a national effort of any significance to help Flint with its water problems.

This is no longer a society where you can count on the public infrastructure OR on society to help you. Congress is currently cutting Covid aid even more, not just from $2,000 to 1,400 but more and more means testing and based on 2019 incomes, so if you lost your job during the pandemic, you are shit out of luck. (It is also true that people will look back and say Trump gave more money, with a $1,200 check and a $600 one.)

The level of malign indifference displayed by elected officials and senior bureaucrats is mind-boggling. They do nothing to help, but make sure to keep funneling money to the rich people who own them.

You can’t count on the US federal or most state governments. They aren’t interested in the basic duties of governing, like making sure the power and water keep flowing; the dikes are built, the forests are managed, and so on.

That means you have to count on yourself and whatever community you can find or create which is trustworthy.

At the least, build some reserves, but at the most, see what you can do to cut vulnerabilities. I know it’s hard, maybe even mostly impossible if you’re poor, but do what you can. This sort of event is likely to become more common until this political order is replaced, and it’s not clear when that will happen or whether it will be replaced by something better.

After all, California’s PG&E, which had disastrously mismanaged power and also been responsible for some of California’s worst wildfires has paid a heck of a lot of large dividends. To rich people and the politicians they own, it’s doing its job, so they don’t consider any of this a real problem.

Until that attitude changes, probably by changing the politicians, however necessary, you will continue to live in a country where your elites’ depraved indifference to your welfare or even death puts you in danger.

Prepare for it and remember: This state of affairs has actually the norm throughout most of human history. To rulers, people like you and me are cattle, and if the cattle are producing meat and milk, their pain, misery, and death is okay.

It was nice to have a few rulers who weren’t functionally depraved psychopaths for a few decades from FDR on, but for the US and Britain, those times are over.

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Our Society, the Slave Factory

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On March 2, 2021

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Near the start of the pandemic, I wrote a brief guide on how to emotionally handle isolation. A chunk of it was about self-regulation in terms of schedule:

The third issue is emotional self-regulation. Most of us have routines, things we do every day. Get up, coffee, light breakfast, drive to work, work, chat with co-worker, have lunch, work a bit more, goof of on the internet, etc, etc. We’ve figured out routines that keep us mostly in the same set of emotional spaces throughout the day. This is like walking with a cane: You’ve set up mood assists throughout the day, week, and year.

When you lose that routine, you lose those assists.

But the issue of self-regulation, indeed, of self and routine is much larger.

The fact is that between helicopter parenting and school, most people today have never had to learn how to self-regulate meaningfully beyond the self-regulation required of any good slave or servant. Their schedules, from childhood, were all determined for them. Their self was created by other people, and their fundamental choices boil down to reactions for or against it.

Then, when they become adults they have university (a bit more freedom) and on to jobs, where for 40 of the most useful waking hours, a boss tells them what to do.

Most people have thus never learned to truly manage their own time, thoughts, and emotions without schedules and activities imposed by other people. It’s no wonder that some people retire in their sixties and promptly die, with “nothing to do” absent an overseer.

You can’t be your own person, not truly, without unstructured time, and I would argue, alone time. There’s a study that found most people would rather give themselves electric shocks than be alone with nothing to do.

They rely entirely on the environment, an environment controlled and structured by other people, for emotional regulation.

Without work/school/internet/tv/games, etc… they’re lost. I’d say without those things they stop being a self-regulating person, but the point is that most people have never been self-regulating people.

Worse, activities like school and jobs, despite the lies you have been told, and which some believe (especially, oddly, about school) aren’t designed with your interests at heart. School is a slave factory. You may get some knowledge out of it, but the UR lesson is: “Do what you’re told, when you’re told, the way authority wants it done. Ask for permission to even talk or go to the bathroom.”

That’s what children are trained to do for 12 years. Then university trains them some more: At elite universities, they’re trained to have a bit more freedom to meet goals (deadlines are negotiable at Ivy league universities, but not at most State universities), and you’re released into the job market, where those who went to elites have to make some decisions, and those who didn’t are expected to be good little slaves, and sure as hell not to think or feel for themselves.

We have a society that endlessly talks about freedom, but in our daily lives, the vast majority of us are not free and never have been. We have spent almost all our lives with our primarily daily activity is determined by other people, who often also tell us what to think and how we should feel.

Such a people are not, and cannot be, suited to freedom.

Forget all the other criticism, the fundamental problem with capitalism is that it allows only a small percentage of the population to live free lives, and makes the rest into either slaves or (if they don’t have work) so poor that they have no effective freedom because of their poverty.

Our society is a slave factory and until we recognize that and reorganize it so it isn’t, it will produce slaves.

What we call freedom today is simply the ability, sometimes, to choose who our master is.

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The Simplest Explanation For Not Breaking Covid Vaccine Patents

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On February 15, 2021

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The faster we get everyone immunized, throughout the world, the more likely we can stop Covid from going chronic, becoming the new flu (but more deadly, unless/until it mutates to become less fatal, which the untried models say it should.)

However, if Covid is cured, well, you can’t make money off Covid any more, can you?

Chronic Covid, mutating constantly, means more and more vaccines, and more and more and more money for vaccine makers.

Ghastly, and I know that many readers are probably, “that’s absurd”, but consider, does it have both explanatory and predictive power?

Does, “Covid makes the rich, richer so they want it to keep going” have explanatory and predictive power?

Qui Bono? Who benefits? Since the people who run our societies profit from Covid, why would they actually want it over (remember, billionaires have become vastly richer.)

I, too, dislike living in a society where this explanation has stronger predictive power than “our leaders don’t want us to die in large numbers, and become poverty-struck, just so they can get richer,” but that statement, well, look at it closely. If that was true, how would our rulers behave? Not just during Covid, but at other times?

Yeah.

I mean, I’ve been saying this sort of thing for a while, because it’s obviously true, but I’m embarrassed it took me so long to realize it applied to vaccine creators as well, especially since Pharma has a well-known bias towards medicines that are palliatives, not cures. Someone who needs your medicine again and again is much better than someone who needs it only once.

Gotta admire the pure predator instinct in our rulers. They’re the wolves, we’re the sheep and God, do they love mutton.

It’s them or us, and so far, it’s us.

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Bitcoin Is Reactionary Money

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On February 8, 2021

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This is only the second time I’ve written about Bitcoin. I have friends who have done very well off it, and Bitcoin’s fans are fanatical about it. This post will probably get more hate than everything else I’ve written combined.

The reason they’re fanatical is that it’s made many of them filthy rich, for doing nothing but being a first mover and HODLing (holding.)

Bitcoin’s original selling-proposition was a good one: peer-to-peer money; cut out the middleman. This is something which needs to be done, because the middlemen regularly abuse their power by shutting people they don’t approve of out of the system. This is true on the national levels, with sanctions, and true on the individual and corporate level. I remember when Visa, Matercard and PayPal all cut off Wikileaks, for example (long before 2016). They regularly cut access off from companies selling legal goods they don’t like (for example, various nootropics, or soft-porn.)

So a way of getting past these gatekeepers, whether sovereign or corporate, is needed, as those gatekeepers regularly abuse their power.

The problem is, to quote Stirling Newberry, that the bitcoin is the worst way to do something necessary. It has massive transaction costs, in terms of energy, and thus is bad for the environment. But, as money, it is reactionary money: it was designed to have 21 million bitcoins max, with less produced over time (halving rewards).

What this means is it vastly rewards early-movers. The sooner you got in, the more money you made. The people who made the right decision in the  past, control the future, much as the families who were rich in Florence in the 15th century are rich today.

This would be great if making one important decision good for yourself meant you would always make good decision in the future that were also good for other people. Money is power and people with more money have more power. Bitcoin creates a new power bloc: those who got in early.

There’s no reason, however, to assume one good decision for yourself means you will make future good decisions that are also good for other people. (At the extreme end, Genghis Khan says hi, and so does every other successful conqueror. So do the people who crashed the world economy in 08, but got bailed out.)

Bitcoin is deflationary: it gains value over time (assuming it doesn’t crash). Deflationary money is not good money. It restricts what can be done with it, rewards dead money (people who just sit on what they have), and empowers (again) people who won the past, not people who are doing good things in the present.

There is also the matter that bitcoin isn’t acting like money. It’s acting like a speculative resource bubble, which is because it is a speculative resource bubble. Making bitcoin is called “mining” for a reason: it was modeled after gold, except that unlike gold, you can’t find more of it once it’s done. It was designed to be GoldPLUS, for people who want to win once and be secure forever.

Its other great feature (which is fool’s gold) is that it can be used to bypass government restrictions. Or so fools think, since it’s a blockchain and every single transaction is recorded. Do NOT use bitcoin to pay for anything the government might one day want to track you down over. Use cash or a cryptocurrency engineered for privacy.

The question here is what’s going to happen when BTC is mostly mined out (mining the last block may take quite some time but it will be mined out before that. Twenty-one million coins can be mined, of that 18.5 have been mined.)

What happens to the value when the first mover advantage is gone? When it’s “mined out?”

Well, that depends on if there’s a genuine use-case. Is it a functional peer-to-peer payments system which lets you bypass both censorship and high fees? Right now, bitcoin is slower than many normal transactions. When mining ends, fees are expected to go up (since miners currently subsidize them while mining) and it isn’t actually anonymous money: in fact, given the ledger that permanently records every transaction, it’s almost perfectly engineered to be a totalitarian technology.

That said, what I see possibly happening is that it does stick around. Paypal is bringing it online, for example. Most people don’t hold much BTC in this future, they simply use BTC as a transaction medium, renting it, in effect, from the big HODLers. The lightning network also promises to speed up and cheapen transactions, there can be fixes to the transaction issues.

The other possibility is that once it’s no longer possible to get rich, we find out this is a bubble and a ponzi scheme. The first movers who were smart enough to cash out along the way do great and the bubble bursts. (If I were a big HODLer I’d hedge: cash out about half and buy off-chain assets, keep the rest in case BTC sticks around as infrastructure.)

Much of this depends on legal status and institutional support. Contrary to what a lot of BTC maximalists think, BTC can absolutely be shut down if enough big governments decide to do so. Set the forensics on the transaction chains and make its use illegal, subject to penalties or even jail time and yeah, that will destroy much of the value. It’s only a store of value if you can turn it into real world goods. If you can’t, it’s just a digital asset, worth less than a high level MMORPG character.

All that aside, the main issue is, again, that it’s reactionary money, intended to create a new class of winners who are then protected by the fact that they got in early enough, by the design of the coin itself.

It’s why BTC worked: because it was designed to create a protected asset class that rewarded first movers. The utopian stuff is overstated (because of the ledger). BTC is a greed project dressed up in idealist clothes, which doesn’t mean many people don’t genuinely believe its utopian promise. (Much as big capitalists constantly say how wonderful capitalism is for everyone and how they deserve to be rich because they make life better for everyone.)

All that said, I like a lot of BTC people I know and if it’s something of a scam, well, it’s not one-one hundredth as bad as what Wall Street does every day. In a world where almost all fortunes are illegitimate, based on scams or hurting other people, BTC at least gave some people outside the usual class a chance to get rich or make a bit of extra money.

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What Is Important About The Reddit Gamestop Short-Squeeze

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On January 28, 2021

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So, some Redditors found that Gamestop was being massively shorted. They bought up the stock, forcing the hedge funds involved to buy those stocks at huge prices to cover their shorts. This is known as a short squeeze, and market players do it all the time. What is different here is that a bunch of unwashed hoi polloi are getting in on the action.

The main hedge fund appears to have been driven to bankruptcy, or it would be if it wasn’t going to get bailed out.

And that’s what matters: not what the Redditors have done, which is 100% legal and done all the time, but the institutional response: to bail out rich people who got caught with their pants down.

The markets exist, at this point, for one reason and one reason only: to give money to rich people. It is an insider game, and if you’re on the inside you essentially can’t lose. The exceptions are very rare, the class of insiders is protected at all costs, as it was in 2008 to the tune of 20 trillion or so in the US alone (ignore the Treasury and things like TARP, the real action happens at the Fed.) Other central banks also flooded the system with money, so the end result was probably over a 100 trillion.

Since then central banks have regularly bought up assets simply by printing money. Insiders play various games, but the key is that if they win they get to keep the money; and if they lose, government steps in to make them whole. Since the game is rigged for them to make money in the first place, it’s hard to lose money, but like a gamer who knows that death isn’t real, and they can just restart, they push everything to the max.

The entire game needs to be shut down and re-booted with Glass-Steagall era controls at the very least. Hedge Funds need to be made essentially illegal, private equity needs to go away, and these people need to eat the losses when it is shut down.

But in the meantime, as you watch this show, notice the institutional reaction: “OH MY GOD, ordinary people are making money and real people are losing money and we must do everything possible to stop this!”

It’s a big club, and you aren’t in it. (Well, one reader wrote me recently to say they in it, but I assume the rest of you aren’t.) While you struggle for rent and food and put up with an abusive boss at a shitty job so you can survive, these guys enjoy their super-yachts and if anything goes wrong, know that regulators and government will jump all over themselves to save their asses.

Hope you’re enjoying that $600 check, as Biden reduces the $2,000 check to $1,400 and says he’s OK with means testing it.

Update: and so it goes.

Update 2: Same hour that apps close purchases to retail investors, AMC (another target), issues 44 million shares: Hedge funds can buy ’em, but short squeeze retail investors cannot. Sickening.

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Anti-Terrorism “Meat Grinder” Coming Home

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On January 19, 2021

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I can’t say it better than this, so…


If you think this will only be used against people you don’t like, you are delusional. This bat will swing left, hard, and hit BLM and Antifa, certainly harder than it hits the right.

What is laughable about this, of course, is that US anti-terrorism has been massively ineffective. So if they turn it loose in the US, it will, indeed, grind up lives, but it won’t stop any serious insurrection, in fact it will create the conditions for the insurrection to get worse.

Robb also observed that the wall are going up in D.C. and it is being turned into a “Green Zone”. The elites, terrified, are retreating from the public and isolating even further. That move never ends well.

Say what you will about Nixon, but he went to see anti-war protestors with only one aide and no Secret Service protection. FDR, after surviving an assassination attempt, removed the secret service officers from in front of his bedroom.

Our current society is ruled by bed-wetters. On the other hand, they have good reason to be scared, because they know that life for Americans has gotten meaner for over 40 years, and they know they are why. (Yes, the oligarchs bought them, but they sold.)

This American foolishness has gone on long enough. Americans have been divided into camps, hating each other and regarding each other as the enemy. And indeed, they are, but only because they have been suckered into fighting.

The people who have done the most harm to red-staters and to blue-staters are oligarchs and politicians. In a sensible world, differences would be put aside and the oligarchy and politicians who serve them would be taken down.

After that, you might find that you have more in common than not, and that the differences which seemed so important are a lot less important than regaining the over $26K of annual income they stole from you and the declining lifespan.

Meanwhile, the oligarchy is gearing up for a war of them vs. everyone who isn’t on their knees. They’ll hit your enemies, sure, but unless you’re on your knees, they’re going to hit you, too.

As for the Trump insurrection, it occurred only because of elite inter-factional warfare. More on that in another article, perhaps.

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You Can Always Get Half the Population To Hate The Other Half

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On January 15, 2021

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So, there was a lot of violence, relatively speaking, during the Trump administration, though most of it was cops beating BLM protestors. (Generally violence erupted after police started it, though there were exceptions.)

There is going to be more during the Biden presidency, because Republicans don’t believe that Biden won legitimately. These numbers seem to be around 70% or so. Meanwhile Biden is unlikely to fix the economy, though hopefully he will get Covid get under control (an effort which will be hampered by the incompetence and stupidity of Governors, including many Democratic ones like Cuomo,)

My voice is small, the heyday of the blogs is done, but I will gently suggest that “cooling it” might be wise over the next few months. The fact is that the election wasn’t stolen. If it was, I would say so. You simply cannot get to the votes Trump needs with fraud allegations. The worst things the Dems did were actually voter suppression of third parties (keeping them off the ballots with specious bullshit), but Republicans routinely engage in totally egregious voter suppression of their own.

Biden is not going to be a bad President for Red America. He’s bending over backwards to try and appease Republicans. A lot of Democrats think this is a mistake, but this is how it is.

America is strongly polarized. Terribly so. Stories of family members turning in relatives for the Capitol storming are routine.

This is BAD. When you get to the point of families narcing each other out, you’re in a really bad place nationally.

Both sides are convinced that they are in the right. Republicans are, yes, wrong, but we live in media bubbles. I saw a stat that after Fox called the election for Biden it then continued calling the election in doubt hundreds of times. West coast elite techies came down on the side of Democrats, which is going to pay some awful dividends even if it was the right decision (because this has made them a partisan branch of government making decisions that should be made democratically. Places like Faccebook, YouTube and Twitter are Commons, and that they are privately owned does not change that fact.)

If you don’t want this to spiral out of control, find a way to cool it. I am one of the few blogs left who is read by both sides, even though I’m a left winger.

The people who are responsible for this are the people who have spent 40-50 years dividing America. Fox and conservative talk radio started it, places like MSNBC continued it by creating partisan media for centrists (there is no left wing media of significance, Jacobin and WSWS don’t cut it.). Matt Taibbi’s summary of how this happened is essential reading.

Right and center and left have been divided into tribes by the masters. The simple fact is that there is only one enemy, and that is the oligarchy. Everyone who isn’t in the top three to four percent is oppressed by them. They have used culture war to divide. The elites who supported Trump don’t want regular people to be better off: they’re willing to give them anti-abortion policies, sure, but they don’t genuinely want to pay them more or give them more rights.

The same is true of the elites who support centrists: the “Resistance”. Silicon Valley regularly engages in activities meant to suppress wages (the late, sainted, Steve Jobs put together an agreement they wouldn’t hire each other’s engineers, for example.)

Almost no members of the oligarchy support the left: BLM and Antifa have little actual support. They get some nods, but note that Democratic Mayors and Governors, with few exceptions, still let the cops crack down on them terribly and Biden’s response was “we should give the cops more money.”

If the people who stormed the capitol had been successful in overturning the election, it would just have been a victory for one set of nasty elites over another set of nasty elites.

The actual problem in America is people aren’t sharing a reality any more. This isn’t just isolated to Republicans; they’re wrong about the election, yes, but Liberals (centrists) have been terribly propagandized too. Remember the BS story about how Russia was paying bounties for the Taliban to kill American soldiers. It was obvious BS, at the time, and still treated seriously. There have been many such stories floated in the Liberal press, keeping Liberals in a frothing rage at Russia and Trump for the entire Presidency; insanely angry and unable to think even as Democrats voted for almost all of Trump’s bad bills and Democratic governors like Cuomo fucked up the Covid response terribly.

Killing each other; hating each other, at the behest of oligarchical factions is insane. Doing a coup based on lies (as opposed to a revolution based on truth) is insane and self-destructive.

You have an enemy. It is only your fellow Americans because they have been lied to for 40 years. This doesn’t mean they aren’t dangerous to you now, of course, but remember the cries of the Capitol protestors; their anger,  when they realized that most of the cops were still willing to fight them.

The cops work for the oligarchy. The red-teamers thought the cops were on their side. Oh, they’re more sympathetic, yes, but they work for the Man.

Divide and keep conquered is the oldest playbook in the hands of ruling classes. America has been riven by it and may be destroyed by it.

Look past the hatred (often well deserved) and see the enemy: the one that manipulated you into hating each other so you wouldn’t go after them. The one who stole $26K in wage increases from you over the last two generations.

Someone’s pulling your strings, and you’re dancing like puppets.

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