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

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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The Terrible Bind America’s Elites Are In

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On January 11, 2021

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One point worth highlighting right now is that, despite the push to impeach AND convict Trump, Hawley, and others, it’s unclear that it will happen — even unlikely.

These folks did push the invasion of the Capitol, and it’s more and more obvious that some of the invaders had rather sinister plans had they been able to grab Senators, Pence or Reps; the zip-ties make this rather clear.

They made US elites feel unsafe in a way that hasn’t been true since 9/11. US elites regularly kill, impoverish, and hurt millions of people, but for them to even be so much as scared is intolerable.

The problem is, this is colliding with another principle: The principle of elite immunity from consequences. Elites don’t really go after other elites. Trump, pre-Presidency had committed dozens of crimes, but was never prosecuted, because everything he had done, did others had done also.

Essentially, every senior Wall Street and banking executive is guilty of fraud in the lead up to the sub-prime crisis, and they were all let off with slaps on the wrist. George Bush was unquestionably a war criminal and so were many of his senior officials, and I’d argue the same is true of Obama.

Even Clinton’s “emails,” widely dismissed as “no big deal” is the sort of offense which, if done by someone junior, would — at best — end their career and would more likely lead to jail time.

US elites send other elites to jail very rarely, and political elites do this almost never.

So there’s a real bind here. On the one hand, some Republican elites put the rest of the US federal political class at risk. On the other hand, well, who wants to set a precedent that a US president, senator, or representative can be truly held to account? Impeaching is one thing, convicting another (which is why Biden is wishy-washy about impeaching and convicting Trump).

Who knows? After all, where it would end if elites started holding each other accountable, when they all know that almost every one of them has violated many laws and far more norms?

For elites, the law is a sword they use against their lessers, not a weapon intended to be used against them. It is a shield against the hoi-polloi and has nothing to do with justice or equality before the law.

Feel for them, in their terrible dilemma: What is more important? Their physical safety or their legal immunity?

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Why Larry Summers MUST Believe $2,000 Checks Are a Bad Idea

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On December 29, 2020

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Larry Summers, the man who is reliably wrong about everything, came out against a $2,000 check for Covid release.

It’s worth examining why, because Larry is an economics exemplar, and what makes him different is not being wrong about almost everything, it is being willing to shoot his tweet off about it.

That chart indicates there is no problem: The economy is on course, and fine. A $2,000 check for everyone will “overheat” the economy.

Larry Summers, 2013

Larry Summers, 2013

There are three problems with this. The first is believing the numbers mean much of anything. Disposable income is one of the hardest things to calculate; there is a lot of guessing (called modeling) involved. We don’t actually know what everyone’s expenses are every month, and worse, we don’t know which ones they haven’t been keeping up on. If you give someone an extra $2,000, and they spend it on rent or paying down their credit card or student loans or mortgages, it turns out it wasn’t disposable income. Nor can you be sure what will happen to savings when you give someone a (small) cash windfall: They may save a fair bit of it. (The “marginal propensity to save may change to use econospeak.)

So +2,000 may not increase spending: We don’t know how much will go to savings and to debt repayment or other expenses.

The second thing is the idea that a one-time $2,000 windfall actually matters much. Even if it did all go to disposable income and get spent, so what? It’s a blip. Pricing and inflation decisions are made on longer term expectations, far more than on windfalls; if prices rise, they’ll fall back immediately. It’s a yawn.

The third is the great failing of neoliberal economics: A refusal to deal with distribution. Back on December 10th, a story claimed that 11.4 US households were $70 billion dollars behind on rent, averaging $5,000 each.

A story in November had the number of people behind on rent at 40 million.

The stories for people behind on mortgages and student and credit card loans are similar. More people are homeless, and so on.

Aggregate income is fine, in part because of UI extensions, but also because Covid has seen a redistribution of income and wealth from the poor and middle class to the rich.

Everyone’s not OK. Tens of millions of people are in a bad way. In California, something between 40 to 50 percent of small businesses are in danger of closing and when some of them (be optimistic, say half) do, those jobs will go away.

So, let’s go back to Summers. He sees an aggregate economic number known to be unreliable, and assumes that it is reliable in a pandemic. He assumes that people will spend all the money, thus “overheating” the economy, rather than using it to pay off debts (to people who probably are also in over their heads and thus will not be spending much) or saving it. And, he doesn’t take into account the fact that aggregate personal disposable income, even if accurate, is an aggregate figure. Or perhaps, being generous, he assumes UI and other programs catch it all (if they did, we wouldn’t have all those people near eviction or small businesses near bankruptcy).

Summers lives in an imaginary world. He lives inside models and statistics and assumes that, combined, they represent the world well. The statistics often don’t, the models are often garbage, but a man who has dedicated his life to neoliberal economics cannot, indeed must not, see that, because if he admitted it was true, his entire life would be based on a lie.

So, the numbers are fine, the models are fine, and giving people more money will overheat the economy. It must be so, or Summers is a fool who has wasted his life, however much money he may have made.

Indeed, if he were to go down that rabbit hole he might realize that he helped cause the financial crisis with securities deregulation and didn’t see the housing bubble and so on precisely because he believes nonsense models and facts. Which would mean he has done great harm, and that a reasonable person who didn’t believe a bunch of nonsense wouldn’t have done all that harm.

So, the numbers are fine, the models are fine, and people don’t need $2,000 checks.

(Aside: I am given to understand by a friend who knows Summers well, that he is in fact, in terms of raw processing power, brilliant. I note that raw processing power, as my friend Stirling Newberry once pointed out to me, just gets you to the wrong conclusion faster if you don’t have judgement.)

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Effects of the New 60 Percent More Infectious Covid Strain

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On December 28, 2020

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Cases have been found outside of Britain, including in the US and, ironically, France (slammed the door too late.) The practical result of the increased infectiousness are discussed by Tomas Pueyo.

The points are, as you’d expect, that it increases the speed of exponential growth. If it becomes the dominant strain (and it almost certainly will, because it grows faster), you have to really lock down. No sham lockdowns, people don’t go out for anything but food (maybe you even deliver that); schools are closed, no one works outside the house unless they truly are an essential worker.

Herd immunity now requires 75 percent+, not 60 percent of the population. That means it will take longer, and with respect to vaccines, people will need to be convinced to take them, or if necessary, forced to.

Countries that already got Covid-19 under control, like Vietnam, New Zealand, China, and Taiwan (notice a trend?) will be fine. They just keep tracking and tracing; keep quarantining visitors, and keep clamping down hard on even a hint of a break-out. Those of us who haven’t, like most of Europe, the US, Canada, Brazil, and so on, can either get serious RIGHT now and close schools and go to a real lock down, or we are going to have to wait for vaccine immunity, which may take until the end of 2022 depending on how many doses your country is getting and when (and if people will take them, or be forced to).

In general terms, my sense is that the first half of 2022 is going to be worse than 2021 in countries that have fumbled Covid, after that things should start improving noticeably.

This was a pro-active choice by our elites: They decided not to handle Covid. It was handled in many countries, the playbook is known to anyone who cares to know it just by seeing what was done or reading a 101 textbook, but “fumbling” Covid made elites in countries like the UK, Canada, and the US a lot richer and more powerful, so it was allowed to rage through the population and destroy the small business economy so that those who were able to stay open, like Amazon and Apple, and so on could grab huge amounts of market share.

Grandma died and young people got life-long heart problems so Jeff Bezos and private equity scum could get richer.

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You Can’t Buy Anything That Matters When It Matters (Covid Vaccine Edition)

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On December 12, 2020

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… unless you have control over the production facilities.


I think this map is a little inaccurate, but it makes the point. Money matters, yes, but having control over vaccine manufacturers and R&D matters more.

This is true of everything. Oil is not a global market if there are ever shortages decision makers care about. FOOD is not a global market if there’s ever a worldwide shortage, and countries which net import will find that out. (The Irish famine, where Ireland, then an imperial colony, continued to export food even as its people starved, underlines the word control.)

Global markets are OK for things that don’t matter. For anything that does matter you want manufacture, R&D and supply lines concentrated in your own country or that of true close allies. In those cases, you want mutual vulnerability. If country A has it all and is a close ally, that won’t work when they’re desperate, you have to have part of the dependencies.

Even this doesn’t work completely. It was very popular before WWI to state that a big European war couldn’t happen because of how interdependent the economies were.

Yeah.

 

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Industrial policy means that if you can, you make it at home, and if it costs a little extra, too bad, slap on a tariff. If you control natural resources, you NEVER sell them raw if you have any choice. The history of England’s economic development leading to the Industrial revolution starts with a ban on selling English wool to mainland Europe, allowing them to build their own textiles industry. Of course, those textiles were worse than what Flemish weavers would have made, and less efficient to start, with higher prices. The English, correctly, did not care. They had the wool, and there wasn’t a huge surplus of wool. Buy the clothes from us or no one.

Food, water and essential goods: if it is at all possible you want to be self sufficient in all three. In sensible countries a great deal of geopolitics is driven by this when a country can’t do it all internally. China knows, for example, that the US can shut down the Strait of Malacca any time it wants, crushing their oil supply and that is a major reason why they are creating a huge land route all the way across the Asian continent, and getting snuggly with the Russians (who can supply oil by land.)

Chinese economic policy, letting Westerners get super rich by producing goods in China, was also driven by this. The Americans aren’t wrong, the Chinese were super-aggressive about technology transfer. The deal was often that in order to get access, you had to give them the tech. If you wouldn’t, they would try and steal it (Americans stole a ton of British IP back in the day, don’t get all pious, everyone does it.) There was also technology-arm breaking creep. Sure, you gave us a tech a few years ago, but what have you given us recently, and why should we allow you to stay in our market today?

Foolish nations, like Canada and the US, let key industries go overseas, or sell raw materials without processing. Wise countries don’t, unless they’re getting something very worth it in return. Getting a bunch of new rich people who made their money by selling your country out isn’t “worth it” to anyone but the rich people and the politicians they bribed.

Money doesn’t cut it. Per capita Canada bought more Covid vaccines than anyone else, but notice that Canadians won’t be in the first wave to get mass vaccination. This is a “white, 1st world” country, and it can’t buy its way in. (The case is a bit more complicated than that, because the government are incompetent, but we’ll leave it there for now.)

If it isn’t on your territory, where your people with guns and your bureaucrats have power, you don’t control it and when it matters, you can’t buy it.

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Twelve Million Renters To Be Homeless Soon Because It Benefits the Rich

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On December 9, 2020

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And so we are where knew we would be:

Nearly 12 million renters will owe ~$5,800 in back rent and utilities by early January.

This was predicted regularly: people lost their jobs, they got one $1,200 and improved EI benefits for a while, and that’s pretty much it. Eviction protection is nice, but it doesn’t pay the rent and ends. This was 100% predicted and predictable, your lords and masters knew it was happening and would happen.

Oakland Homeless Encampment

They could easily have stopped it, and chose not to. The Fed and Treasury and Congress bailed out rich people, and their wealth has skyrocketed. Meanwhile New York wants to put a tax of $3 on deliveries of anything but food and medicine to bail out the subway system; taxing the poor and middle class rather than the rich who made out like bandits.

The money to fix this is fairly trivial. 69,600.000,000 – about sixty-seven billion dollars. In context, the TARP bailout for rich people was 700 billion back in 2008. The Federal reserve, by some calculations, floated about 20 trillion dollars. Seventy billion isn’t even real money in the modern world.

 

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But when renters can’t pay rent, the landlords will go bankrupt, and the actual rich will buy up the properties. Meanwhile desperate unemployed people keep wages down and ensure that current workers will do anything they are told with no back talk, because they know there are way fewer jobs than workers. Win/win/WIN.

If you’re rich.

So, if you’re going to be homeless, or lose the property you rent, rest assured it’s in the cause of allowing the rich to control even more of the economy, gutting small and medium landlords and small and medium businesses (who have had to shut down, while companies like Amazon and large retailers make mint.)

Your leaders impoverish and kill you for money. That is all. Wouldn’t want you to think this is for no reason at all or because of incompetence. Your poverty and desperation does help somebody, and that’s why it is happening.

 

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