America and the growth of bureaucracies

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What we see happening to America is all these bureaucracies and associated contractors are propelling growth of their area with no regard for the greater good of the society.

Every year the defense department wants to expand its budget and scope.
Every year the prison system wants more prisoners and more money spent per prisoner. Bot the private and public prisons want to expand, along with their unions.
Every year the medical industry wants to grow revenue with no regard for whether this benefits patients.

Education is yet another example, the USA is now spending more per student on education than all the major European nations. But because education is seen to be failing the cries are for more money to the system.

I had to laugh in my area one of the politicians was quoting a police official saying that we need to spend more on policing. Roofer arguing we should spend more on roofing.

At some point the nation needs centralized leadership who thinks about the big picture. But that seems a long way off.

Super Genius Productivity

One super genius programmer who creates a better mousetrap which say gives a 5% productivity improvement across 200,000 workers in a specific job around the entire globe.. that super genius has godlike productivity.

It is also a permanent increase. His advance is not just 200,000*5%*average wage... its the net present value of the future savings of that forever. Then next year he can work on the next 5%.

Betting against technological advance the conventional view

The Japanese also believed that useful generalized robots were coming int he 1990's and spent billions researching it. They eventually had to admit to themselves that the hardware/software just wasn't there and wouldn't be for quite awhile.

If you look over the last 15 years there has been an explosion in AI. One small example is 15 years ago airlines did the maximization of seat use on their flights with humans, and it wasn't sure how long it would take computers to be able to do it. Today computers do it all, booking the seats, setting pricing, scheduling their flights to maximize revenues. Its almost taken for granted that a computer would do those things now.


Also realize the commercial incentive is going to be insane. Right now there is no point trying to develop an AI robot. Because your average computer still does about 100,000 times less FLOPS than a human brain. That is a big step up from 20 million times less FLOPS a decade ago, but still something that a human brain would recognize in 1 second, would take the robot over 24 hours to figure out!!

However in the 2030's when a computer might figure the same question out in 1 second, its a different picture. At that point the googles, microsofts, facebooks and friends of 2030's are going to be in a race to bring out useful AI, and updating at a furious pace. No doubt there will be many hard problems.. but they will be able to put thousands of super genius programmers and philosophers and working on them.

The problem with the people who are betting against technology and saying its impossible.. is they are betting that of thousands of teams of geniuses around the world, some with near unlimited budgets, none of them will make any breakthroughs.

Its the same problem with the peak oil crowd. They are always betting that mankind will never be able to come up with new ingenius ways of extracting the oil. All it takes is one engineer somewhere to make a breakthrough and their theory is shattered.

Societal Changes in early days of Automation

Yes its going to be bigger change than we can really conceive of.  Most people even those who actually think about these things are so short-sighted, they say things like 'wow that is going to suck for low end manual workers.  Good thing I do knowledge work, a computer can never replace that.'
I argue that even though we are at the very early stages of automation.. we are already seeing profound changes across the Western industrialized nations.  Britain is now losing half a million net jobs every year like clock work.

It shakes the entire basis of our economy.  An economy driven by the mass consumer market.. Those consumers earning money to consume with from selling their labour in a competitive labour market.  If you upset that balance in the labour market between supply and demand you can cripple wages and thus their ability to consume.

Traktion argues powerfully that declining prices is a good thing.. and the price of things will deflate faster than wages fall.  One minor problem our monetary system is a debt backed system, where the nominal amount of hte money you owe remains the same.. and it only really works with inflation. 

Otherwise it is mathematically impossible for everyone to pay back all the loans.  The collapse of the banking system is a logical outcome of a broad deflation.  And that is just one of the consequences.

Indirect impacts of mass technology redundancy in your society

Something that is already occuring is as technology automates millions out of work... it has a growing and ultimately catastrophic impact even on those who are still in work.

Firstly there is an evaporation of their market. I think a good estimate in the UK is we are losing ~half a million jobs a year. A net loss of that. About 1% of the labour force each year. Well say you live in a town where the steel mill gets retrofited and now needs only 2,500 workers instead of 6,000. You are talking a virtual obliteration of the town's economy.. I've seen it in the North of England.

This obliteration affects near all the local businesses and their employees. This is one of the reasons Brits are fleeing to 'greater London'.. sort of a last stand of the old economy. Like a regime dying under assault from another power, eventually the remaining regime forces coalesce in the capital city.

The second indirect assault comes from the impact that a flood of now unemployed workers exerts on the remaining workers. Say you are fairly well making £25 pounds an hour. You are smart, good with customers.. but ultimately like all humans have flaws too. Well many of the now unemployed are also smart, hard working.. and now desperate. Some say they can learn and take over your job and would be happy to do it for £15 an hour.

A report on the front page of the forum said 'wages fall for the 5th straight year'. -Entirely predictable in a world of automation and surplus human labour.

How long until we see a dusting, polishing robot

In the confines of a controlled factory the dexterity of robots is now beyond any human. The Japanese auto industry surpassed what the finest german master craftsman could do in 2002-2003.. forcing the Germans to rush in robotics.

However in the real world robots still have a ways to go. The computing power to even walk around the room is huge. For example each aspect of a step the robot takes changes how the forces of gravity are acting on the robot, as it now is in a different position, plus the momentum is moving in directions. So it has to be able to think ahead. We do that automatically.

Our brain is estimated to do 20 million billion calculations a second by Ray Kurzweil. In the year 2000 a desktop computer reached about 1 billion calculations a second. In 2011 we probably have desktop computers around 500 billion calculations a second. Still 40,000 times out from what the human brain can do.

We will probably see human brain level desktop computers around the mid 2030's.

Where it gets bizarre is a decade later we will probably see desktop computers that have 500 times the brain power as a human brain.

For the task you are describing, sort of a mass produced consumer robot which can dust and polish, I would estimate 2040. Of course such a robot could easily be uploaded with other programs and other arm attachments so it could do nearly every manual job.

Wonderpup's breakthrough in labour compensation theory

Wonderpup from housepricecrash forum, made a breakthrough awhile back to realize that the value of your labour in a free market is not in fact based on your production. Although that isa factor int he maximum theoretical amount you could make. Instead the price for your labour is based on the lowest bidding human offering the same labour.

So we see in auto production for example, the first industry to broadly use industrial robots, an astonishing rise in productivity. Production per worker is up 300% just since 1990 in the auto factories! Yet the auto companies have been cutting wages and benefits over that time. Simply because other humans are bidding lower.


As you say a big trend in our society is wages are trending towards zero. At many of the big private employers like the big box retailers and grocers the wages are so low that there is no way a person could live on them. Yet these operations are also immensly productive per man hour! Wages are so low that millions are choosing to go on welfare, which is a pathetically low standard of living, but actually better than what they get working full time. I like your wording, the commodification of labour.

Declining marginal reward of Working

Say there is 15 million available jobs in the private sector.  And 20 million people who want to work full time.  (most people are worker bees, they don't have the independent thought to open their own business and run it).  That overhang of 5 million people will over time drive down the wages until there is no marginal benefit to working.

And btw as automation, offshoring, immigration, over-regulation and so on make us more efficient, each year the private sector is contracting.

It is simple supply and demand.  Imagine the auto industry in Europe produced 20 million cars every year.  But demand fell off to 15 million cars a year.  Yet the industry kept pumping the cars out.  It would only be a short time until the marginal profit on the cars was nothing - or even losses.  What the industry would do at that point is reduce capacity, as they have done since 2008, until capacity was better aligned with demand.  Alas we can't reduce our population by 5 million easily. 

UK fracking to save Britain

http://www.youtube.com/watch?v=jis-K8wmwhs

An excellent presentation by this man.  Very well thought out and many interesting statistics.

The Nazis and debt free money

The UK has a broad money of ~6 trillion pounds. I would like to see them print 3 trillion pounds and spend it into the economy on national projects over several years.

When Hitler came to power the bankers were lending him money for the first year or so and he was spending that money into the economy. But then the bankers decided to cut Germany off, and the German government was faced with laying off millions of people working on the national projects.. and the economy going back into a depression.

So the Nazis came up with Labour Treasury Certificates. 1 certificate was worth 1 hour of labour for the average worker on the projects. They made the certificates convertible into normal currency. They used this to build factories, railroads, the autobahn, ports, etc.. The bankers had a meltdown and tried to completely cut Germany off. And were running propoganda saying Germany would have hyperinflation, economy going to blow up. 3 years later Germany was the wealthiest country in Europe... this from the poorest country in 1932.

All without the bankers and their debt-money. Some conspiracy theorists argue this is when the bankers started pushing for a world war to take out the Nazi government.

This is the type of things you can do with debt free money:

Just to give you the idea of the scale we could spend on if we wanted and if we had leaders with vision, here are a few examples.

A 1,600 MW French Areva EPR nuclear reactor will probably cost about £5 billion each. A lot cheaper in Asia, but factoring in UK costs. Well the current UK grid is about 78,000 MW. We could build say 30 EPR's bringing in an extra 48,000 MW of baseload generation. And having nearly free electricity for decades to come. Cost of 30 of them is £150 billion pounds. We printed £275 billion so far and simply gave it to the bankers!


There is a serious housing shortage in the country, especially in the southeast. We could build 1 million council houses costing £250,000 each for 250 billion pounds. I mean in London these could be basically high end tall condo buildings for that build cost. Thats still less than we printed and gave to the bankers! Building 1 million council houses would put to work probably 1 million men, when you look at not just construction, but procurement of British made building materials, utilities installation to the houses and infrastructure like roads, water and natural gas to the houses.


For £10 billion a year, we could put to work 50,000 scientists at an annual cost of £200,000 each, to look into adult stem cells and develop that industry for the UK.

China future growth and their scale

I think China will be able to get to 50% of the US per capita GDP in 20 years. If we assume the real US gdp per capita grows by 2% per year until 2030, that will bring it from 46,000$ currently to 68,000$.

At half that level China would be at 34,000$. Since China is at 4,000$ right now that would allow them to grow by 8 times in 20 years. Which would be 11% a year in real terms.

8% should be fairly easy for the Chinese to maintain as an average for the next 20 years. 


Another couple things I want to mention relate to China's sheer scale. There is scale advantages in economies, and the world has never seen a nation of this scale in capitalism. Let me give the example a bank. Every bank needs a legal department, HR, PR, and so on.. and especially software is crucial.

Well whether your bank has 50 branches, 500 or 5,000 it needs basically the same software system. The Chinese will be able to apply serious scale in every investment.. like writing a banking software system.

Another aspect of scale is risk ability. A bank with 50 branches cannot be doing 1 billion dollar investments. Probably more like 100 million dollar investments. But a bank with 5,000 branches can do 10 billion dollar investments at the same risk level. (because it is funding quite a number of them).

We've already seen that in places like the Congo, where China is spending 11 billion dollars on a copper mining projects. The project involves building roads, rail, hospitals, electric grid, the mines and a port. No one else in the world can risk 11 billion dollars on a project that very well might go bad. China can because its one of maybe 50 or 100 similiar projects.. and they know a number will go bad. But for the 90% that work out, the returns are huge, and unavailable to smaller entities.

Energy's share in production

Also goes to what I've been saying that the nations which use the most energy are the wealthiest. Canada, USA and Australia are at ~14,500 kwh a year per capita of electricity. Britain is at 5,500 kwh! Luckily even half of Australia's level is still wealthy by world terms.


Think about it on a philosophical level to do anything requires energy. Our money is in many ways a representation of our personal share of the energy available to our country. There are other factors, but in my opinion those others factors are in gradual decline relative to energy. As technology and automation advances the human labour aspect of costs declines. And it becomes more about share of available energy.


Think about this example, 50 years ago a vast steel complex employed 25,000 people. Today after quite a few retrofits with more advanced technology it employs 4,000 people. But the output of steel is the same. Obviously for the steel company, the percentage of expenses spent on energy versus wages has risen dramatically. Of course year to year it fluctuates, but over decades the trend is blatantly obvious.

Japan consumer prices fall

Japan consumer prices fall again:

http://www.bbc.co.uk/news/business-15884340



Their scheduled printing is 18$ billion USD a month. In addition I think they've thrown a couple extra printings in to try to lower the value of the Yen.

And 50% of their government budget is borrowing. Year after year. And interest rates are really flying at a base rate of 0.1%.


Still not enough to avoid deflation.


My perscription is to double the printing to 432 billion USD a year. Take that extra 216 billion, buy national bonds and spend it into the economy through the national state. But it is easy to say that.. but culturally and politically it is another thing. Japan is an very conservative society, and the idea of giving people money for nothing is hard for them to imagine.

So invariably they spend the printed money either buying bonds trying to stimulate well something by doing that, or building infrastructure to nowhere.

Top 20 nations in world in industrial electric use

Great link from the UN showing nations by electric use going to industrial and construction.  http://data.un.org/Data.aspx?d=EDATA&f=cmID%3aEL%3btrID%3a121

The latest data on this is from 2008.  Here is the top 20 nations:

China: 2,218,085
USA: 914,897
Russia: 360,082
Japan: 303,802
India: 290,027
Germany: 242,123
Korea: 207,851
Brazil: 197,218
Canada: 188,420
Italy: 141,646
France:  141,206
Mexico:  122,768
South Africa:  117,744
Other Asia(Taiwan):  117,067
United Kingdom:  113,558
Spain:  103,258
Australia:  94,868
Turkey:  72,320
Ukraine:  67,142
Sweden:  57,664

Average Income in the USA over a century.

Some is a higher concentration of money pooling at the top few percent.  But some is simply lost economic activity.  If people with the ability to buy new cars drops from 2.5 million to 2.0 million, production falls by 20% to match.  That economic activity simply does not happen.  Its not that the missing amount goes to some rich guys.

We see in the UK a very broad unemployment which is more economic activity not happening.  And in addition many people in jobs like sales roles(like estate agents) doing very little volume.  So effectively marginally employed.

Ok I found one graph this is for the USA.  Unfortunately this is average income, not median.  But we see even on the average income which includes the top few percent, a general flatlining.

You see on the graph from 1910-1940 the average income simply stayed the same(even through the 'roaring 20s', despite the introduction of radical technologies to improve productivity.
Then from 1940-1970 the big rise from 15,000$ a year to 40,000$ a year.  Then from 1970-2010 it went from 40,000k all the way to maybe 45,000k.

China plan to increase consumer spending

Some of the infrastructure in fairness is stuff that would be needed in time anyways.  To move over 1 billion people to a first world style of life with freeways, rail, ports, airports and so forth takes a mega spend over time anyway.
But the consumer demand side is obviously the real long term solution.. for China, for us, for everyone.  And its far easier said than done to do, as the powerful people in the nations want to keep wages and benefits low.  I personally believe the Chinese leaders are serious and will bring up the wages.  Firstly industrialists in China don't have the control over the political leadership in China like they do in say Germany and Japan.  Secondly every time demand dips hard, China is going to veer into deflationary territory like we saw in 2009, so the pressure will always be there on the regime. 

The leaders said their next plan is to put in place the social welfare state, with unemployment insurance, higher pensions, free healthcare.. so that Chinese dont' have to save so much of their income in case of what-ifs.  50% of Chinese income is going to savings which is unsustainable the other way. 
On a deeper level the leadership has to create a broad national labour shortage.  So that firms are bidding against each other for workers.  The temporary infrastructure build did this temporarily, 40 million migrant workers who lost their jobs in factories moved over to these projects.

Right now China is in a good place, inflation is running at 5% yoy, so a strong sign that demand is actually outpacing supply nationally.  Even though there are areas of oversupply.   

Manufacturing

Imo manufacturing has absolute advantages over services in a variety of ways.  First off manufacturing is scalable.  You can make 10,000 of something or 100,000 of something.  With services you are limited by your hours in a day. 

Even a successful solicitor has next to no money compared to an industrialist.  That should tell you something.

Next and most importantly manufacturing has barriers to entry.  We've seen with software that as wages go up the pressure builds to outsource to places like India.  Actually we are seeing that across nearly all UK strong points, like accounting, business services.  Buy them a computer, rent an office, get an internet connection and you are in business. 

If you develop mega scale industry the sheer capital cost creates a barrier to entry.  Just because say refining becomes very profitable, doesn't mean a bunch of competitors are going to come up with 10 billion pounds each and jump into the market.  The likely person to expand is you(again scalable).

All you need to know is the power of Germany right now. 

EU room to print

There is some cushions.  A big part of why the loans are going bad is the economy is in the tank and then some.  That means there is little to no credit expansion going on from private credit growth.  So whatever amount that was running at before the bust, that amount can be printed and put into the system each year to hit the same inflation rates as before.

Euro wide we are talking probably 3 trillion Euros a year. 

Secondly its hard to say how much bond buying they will have to do to stabilize these nations.  For example if Greece is rolling over high interest rate debt into 40 year, 4% bonds that the ECB starts buying, that is going to take huge strain off of Greece. 

Thirdly the EU can come in with stricter leverage controls on the private banks if the economy ever starts growing again to contain inflation on that side of the curve.
 
Also the EU can begin imposing tougher budget requirements on the member nations going forward.  Although in honesty in the long run I believe they will need a closer fiscal union to stabilize things.  Even when California's economy was nearing collapse they could rely on huge social security, medicaid, education, defense and so on spending coming in from the federal government, in fact 26% of the US GDP is federal spending - compare that to Europe where what 2% of EURO spending is the EU.  And an implicit view of bond buyers that at the end of the day the Federal government would back up the state debt.

German Surplus

I have to agree with people that the German standard of living is way below where it should be compared to their production.  A country, just a couple of years ago the world's largest exporter with 83 million people.. should nto have an average standard of living that appears below the UK average.
One of my best friends a computer programmer lived there for five years, and he was saying wages and what you can afford are lower than in the UK for comparable jobs.

In one of the posts earlier on this thread it talked about an industrial worker in Germany who was happy to take less pay and benefits in exchange for greater job security.  On an individual level you can see his point.. but on a national level German workers should not be having lower pay and benefits than ten years ago, considering the sparkling success of their industries.

It seems to me German industrialists, major corporations and the German state is taking these enormous surpluses and investing them outside of the country, in a systemic attempt to keep wages lower in Germany.  For if these surpluses poured into Germany itself so much of the labour would move to things like home construction or services which would outbid labour from the industrialists.

Mercantilism is a fine strategy for an emerging nation trying to industrialize, but for a fully industrialized country, let alone the leader of Europe its not a viable long term plan.

Without the bailouts

Yes in a capitalist economy as those big institutions like Lehman Brothers and AIG came down, they would have taken everyone with them.. as the counterparty risk was exposed.

After the shareholders are wiped out then it moves to the levels of creditors. First the depositors at the institutions would have been wiped out as they are the most junior creditors. Then moving up the seniority of creditors.

After all the bond loss writedowns and counterparty writedowns, the institutions would be sold for pennies on the dollar. Giving the most senior bond holders something, and wiping everyone else out. Indeed the most senior bondholders would likely choose to hold onto the assets until the process was sorted out.

Whoever bought the mortgage bonds and others that would be sold off in the bankruptcy court would be buying them for again pennies on the dollar. They would then immediately call up the debtors and offer to clear the debt for say 10 cents on the dollar. Then as credit got moving again as the debt was cleared, the offers would not be so generous, and the value of the mortgage bonds would be selling for more.

To make a long story short at the end of the process, the institutions like Goldman Sachs would still be around, only with much reduced balance sheets. But many rich and average people alike would see the vast majority of their investments/savings disappear. Simply as debt is written off, the other side, savings is destroyed.


The system cleared, the game would start over. When the powers that be decided to stop the unwind that was the end of our capitalist system. We now have a zombie economy. Its almost reverse of a normal economy, liek we are happy if the real economy shrinks by only 1%.

Foxconn will mass produce their own robots

A good debate and discussion on Nextbigfuture about Foxconn's plans for automating some of their work.

Foxconn being in the top 5 of the world's largest employers with in the range of 900,000 employees.


http://nextbigfuture.com/2011/11/foxconn-will-replace-500000-workers.html#more

Can democracy deal with the complex problems of the 21st century?

I was pondering whether our political institutions are even capable of solving the challenges that the 21st century poses.  I should say these challenges are also incredible opportunities for prosperity.  Much as the challenges of the 1930's were also great opportunities. 

In the 1930's the western states eventually had to put in the social welfare state in order to save the economy and system.  Otherwise capitalism was destroying itself with mass unemployment and the downward spiral on demand that creates.  The farm combine and other technologies had made millions unemployed, and they were migrating to the cities bringing wages down there, and creating public infrastructure challenges.  In the 1930's many political systems began to fail under the weight of mass unemployment.  Ultimately a number of nations political systems did fall, eg.. Italian democracy and the Weimar Republic in Germany.

The old EU of consensus is already arguably fallen.  And a new German dominated EU has emerged.  To get things done you need one voice in charge.  Others can have a seat at the table and voice their concerns and opinions, but one leader has to make the call.

One of the most basic problems is the out of control power of the banks.  Its insane to be insured by the state, and to be able to take extreme bets and keep the profits if they go well.  Yet our democratic systems seem captured by the monied interests.  Special interest in general seems so powerful that you cannot reform anyting without hurting someone's profit.  So the leaders shy away from reforming anything and just hope for hte best.. or try to print some more money and cover things up for awhile. 
Look at the movements now like the 'indignatos', occupy, the strikes in Europe, the loss of political credibility of both major ideologies. 

Discussion on automation

http://www.housepricecrash.co.uk/forum/index.php?showtopic=170917&st=45&gopid=3158341&

A good discussion on machines taking jobs on housepricecrashforum.

What will happen long before a majority of jobs are automated is demand will collapse.  The army of unemployed will underbid jobs down to the national minimum wage.. like in the USA there is 'click monkeys'.. lawyers who are making barely over the minimum wage, so at least they can be using their law degree.

The unemployed themselves will buy very little, so demand falls.  And as Miko pointed out, those remaining in good jobs will save as much as possible, incase they are made unemployed.  Realizing a best case scenario is several years in a college to retrain into a new skill.  Which is going to require a lot of money.

Faced with falling sales, corporations will downsize, and faced with falling tax revenues, governments will downsize. 

In the USA the people employed was 150 million going into 2008.. but now is 138 million.  (Even as the population expanded by 9 million over the 3 years).  Those 12 million are still waiting for the market to bounce back and create new jobs.

Piecemeal factories

One interesting fact is that in China nearly all the factories are piecemeal. The workers get paid based on their production. Those type of factories were outlawed in Europe and the United States back in the 1930's.

But there are a handful of the factories still remaining that pay employees based on piecemeal.. they were grandfathered in way back in the 1930's. At one factory in Virginia the average worker made 180,000$ a year.

But they had something like 7 times the output per worker as the pay by the hour factories.



In Britain it takes a lot of money and effort just to hire someone, and try to comply with countless regulations - and those are just hte labour regulations, which is one of dozens of regulatory agencies. Most corporations are saying why bother, and simply moving production to Asia. Not like this is a new trend, but we are starting to wake up and say, wow there is actually no jobs in our country.

Why locate production in the West

Part of the issue is that if you come up with a new idea for something to be manufactured.. you would basically have to be an idiot to build it in the UK.

One example that is small by itself but indicative of the problem is the requirement for handicap access and handi-cap bathrooms in British facilities.

What about your business' professionally prepared plan to stop harrassment of lesbian, gay, bisexual and transgendered employees?

And your documented proof that you did not use racial, sexual or other forms of discrimination in your hiring and any promotions that were done?



I hope you have created a union friendly work environment and are providing, paid sick time and disability insurance. Is your building up to the modern seismic code? Where is your report on teh water flow in your facility prepared by a licensed hydrology engineer? Is the ventillation system stamped by a professional engineer as providing adequate ventilation?

Energy output versus wages

One reasons salaries are so low is that our nation's output is so low.  If you look at something like a steel mill or oil refinery the production is so vast, and the energy use is so vast, that the wages are huge - while still being a minor part of total costs.

In fact energy use is directly related to output obviously.. work output.  As we move to a sustainable, less energy intensive economy, our work output declines.

With less output as a society the pie to share is smaller.  A worker operating a vast machien that outputs £500 pounds of value an hour, can easily command £50 an hour in wages.

The same worker, now in a coffee shop, producing just £50 pounds an hour of output.. can command more like £5 an hour.

How to finance and build a manufacturing base

I don't think our society yet has the will to really finance a manufacturing development.  I've been following China's rise closely for over 10 years now, and one of the interesting aspects is how they get into a new business.

Lets say for example Britain chose to manufacture train cars.  And for arguments sake it would take £20 billion in capital to develop 2 corporations to world competitive status.

You choose a city they are going to be based in.  The city and the banks then extend essentially unlimited credit to those 2 corporations to start setting up plant in the city.  Then the banks and city also need to finance a host of supplier manufacturers. 

Once you commit to having a certain business.. you have to go all the way.  If 5 years in you get weak willed, start having doubts and stop lending more money, then for sure you won't make it.  Once you are say £10 billion in.. you have to be willing to go the whole £20 billion, maybe more.

The thing is the rewards are also vast.  You might have to finance deep these companies for 10 years before they start making some real money.  Then you can pay back all the loans, plus interest, and have a huge industry in the city, that is a constant money machine.  As its a vast world out there to sell the product.  When you look at the GDP of the city, it is going to be be huge, because not only do you get the high level manufacturing, but you also get the supplier manufacturing, and the whole related sales and other support.

Say the industry ends up generating £5 billion a year in GDP for the city.  Well that is 50,000 jobs that pay £100,000 a year.

Citizen's Dividend

In my debates on politics and economics I've looked at a number of different ideas. Such as the French idea of sharing the available real work.. with their 10 weeks vacations, 35 hour work weeks and so forth. Which is really a continuation of the New Deal policies.

But first off that still won't work in the long run when near 100% of money producing work is automated. And secondly it just doesn't work with a free society, where no one is telling you how many hours you are allowed to work, and of course the monitors to make sure you are complying.

The citizen's dividend deals with it all cleanly in one shot. I estimate the USA is already able to give 800$ a month per man, woman and child. So a family of four would get 3200$ a month tax free. Almost enough to survive on. There are many possibilities with that foundation, like the woman deciding to go part time.. which frees up work for someone else.

The real crash steps for real estate

We now have seen a number of crashes around the world so looking in depth at what happens in them and you can see the same pattern everytime.  Because of course it is human beings in all cases who respond the same way.  So I first saw the real estate crash in Florida, then in Nevada and Arizona, then the mother of all crashes in California, then Ireland.  I was blog reading through all of them.

The first phase is buyers stop.  Of course there is still a few sales but the volume of sales drop say 50% yoy when looking at monthly comparisons.  There is then a 'Mexican standoff' for 18 to 24 months.  Where sellers won't lower the prices and an interesting point is that in all cases buyers were still trying to pay top dollar.  Its not just sellers who are emotionally invested with real estate always going up, ironically buyers don't want to imagine the market going down.  [b]Everyone buys real estate believing it is an 'investment'[/b].  What happens is buyers simply can't get access to credit.  So we see the bizarre situation where people are continuing to make offers on homes, but the deals keep falling through when the banks won't give the credit.  -the UK besides greater London is clearly at this point.

The second phase to crash guru bloggers is called the 3 d's.  Its where people must sell for one reason or another, death, divorce, distress(job loss).  But I realized this is wrong.  When I looked at individual examples.. even when forced to sell, sellers will not sell for less than the market high.  The main reason for this is most people have gone all the way on the home equity lines, so to sell for much less would instantly bankrupt them.  [b]Therefore they literally cannot lower the price.[/b]  Yes there is the very odd sale that goes through, and lasts on the market for 2 days, like a smart family gets an inheritance and just dumps it.  But this is a small part of the market.  Don't underestimate the emotional attachment to a price too, if someone has built up their retirement on a certain selling price they emotionally can't lower it.

The real second phase is these houses sit on the market literally until the people get foreclosed.  I've seen it happen time and again.  This phase can last like two years.   

The third phase is the real place the crash happens.  The bank now forecloses and is holding the property.  They idiotically won't sell it for less than the note is worth either, because they dont' want to admit a loss - which on their books this loan is still not recognized as a loss.  But then they have to start paying the expenses of upkeep.. like maintenance, and property taxes and such.  [b]Well at this point the accountants in London almost have a heart attack, because these are operating expenses.  They have to report those expenses this quarter![/b]  Its at this point that the bank wants these off its books AT ANY COST. 

Once the banks pull the trigger its unbelievable how the market falls apart.  Right now in Britain the banks are just starting to end up with a number of foreclosures. 

Recycling Surplus

True, part of the issue though is the nature of the debt backed monetary system. Germany being a net saver, must lend tremendous amounts of money to other nations. Because all savings are also debt in our monetary system. So Germany ends up lending money all over the place, including areas where German bankers don't really understand the situation.

Japan was in a similiar situation in the 80's and lost tremendous amounts on bad investments. Now it mainly just backs up savings with the national debt, which is now at 200% of GDP. Germany hasn't been willing to take that path so far.

[quote name='Traktion' timestamp='1306836519' post='3004952']
They also loaned a lot of money to Greece - oops!

Recycling surplus cash into countries running deficits, just so that you can accumulate a [i]greater[/i] surplus is a fools game. China is discovering this, as is Germany.
[/quote]

Yep China figured it out... China is a lot smarter than Japan and Germany.  China took the exporting as far as it could go, and got the technology they wanted, and when it couldn't be pushed farther.. they made the switch to demand led growth.  First by government stimulus, then the second phase that will play out over several decades is consumer led growth.

My feeling is Japan and Germany understand what is happening but the governments are seized by the huge industrial corporations.  Which benefit so much from this arrangement.  Whereas in China the Communist Party is still calling the shots, and only views the profits of the industrial corporations in the big picture.

A similiar comparison is between China and the US-UK.  In the US-UK without doubt the banks have seized control of the political system.  And are doing things good for the banks regardless of whether it harms the populace.  While in China the big 4 banks are owned by the state, which is ran by the Communist party.

The start of the European Spring

This does look like the beginning of the 'European Spring', the moment I've been waiting years for and arguing is neccessary.

The Arab Spring started in Tunisia, when Mohamed Bouazizi was trying to make a living as a street vendor.  But the Tunisian authorities made it a requirement to be licensed to be a street fruit vendor.  And they limited the number o licenses available.  In the bidding for the licenses Mohamed Bouazizi could not afford it.

With his livelihood taken from him, he immolated himself in an act of protest.  That started the mass protests against tyranny in the Arab world.

Now Spanish youth are starting to rise up.  And they are exactly right to, if they don't do something now in a collective movement, most will spend their whole life either outright unemployed or just barely surviving.  This in a first world European nation.

The Spanish youth movement has made an incredible breakthrough of thought.  Instead of being for the right wing party or for the leftwing party they are against both of them.  Which is a much more powerful line of attack.  As this left/right divide has been diffusing legitimate resistance for decades.  Sadly though, they want 'more democracy'.  Which I don't see solving the problems.

The final step is when they are ready to empower one man to solve the problems the nation faces.  Like Putin has done in Russia.  Once the problems are solved and there is opportunity they will be out there making money and having families.  And the money will be there to cover the older people too.

Universal Food Benefit instead of Citizen's Dividend

Interesting graph from the USA on the rise in food stamps.  From 26 million on the program at the start of 2007 to 44 million at the start of 2011. 

I know the idea of a citizen's dividend is unpopular in many circles.  The idea of giving everyone free money just doesn't sit well with the protestant work ethic, foundation of our society.  But people may be far more willing to entertain the idea of a universal food benefit.  Which would have the same effect since we all have to eat and money is obviousy fungible.

Sort of like how universal health care is a popular idea, even though technically we could say we are giving people something for nothing and discouraging work.

For example if everyone in Britain got £100 a month food benefit.  A family of 4 would get £400 a month tax free from that and that would make quite a difference in their lives.  The total cost of the program would be £74 billion a year.

In the US the food stamps are coming on electronic cards that get updated on the first of each month.  Its cheaper to administer that way and there is less stigma associated with using the cards, which appear as ordinary debit cards.

Growing empty office space

A prediction I made some years ago was that in time many office buildings would become empty.  People thought I was crazy, and that it was a sure thing investment. 

My thinking was information technology is step by step taking over the management of information in the organization.  You've got to remember in the 1970's large corporations needed office towers each floor full of rows of cubicles, each cubicle having an office drone.  And each drone was updating part of the information of the corporation.  Such as forms in triplicate, and each being dutifully filed.  With ledgers being updated.

Today most of the information is handled by servers, or even server farms.  Each server can do into the billions of operations a second.  So we don't need so many office drones anymore.  Naturally in the government and banks they still have just as many, actually more drones.  But in the competitive parts of the economy, they have been forced to gradually eliminate the drones. 

For example say an area of the company needed 500 drones managing the information.  Well they also then need building maintenance, management, HR, secretaries, etc..  Now say they need 25 drones to handle it.  And a couple manager.  Well somewhere in the country the corporation would have rented a large space to house all the cubicle drones. 

Luddite fallacy

I definately agree the Luddite fallacy was indeed a fallacy up until recently.  The limitation on economic growth in the past was labour supply.  We wanted say more factory workers in an area, but we couldn't spare labour from the farming fields.  As agricultural productivity soared, all of a sudden we could fulfill our desire for more factory workers.

And indeed the very technology that was causing the automation of jobs, like the farm combine in agriculture, opened up vast new industries.  Like the auto industry.  Which employed millions.. and we could now afford autos, because of course we had the surplus labour who could build them.

However I believe a phase change has happened.  The new technologies clearly appear to be getting rid of good jobs faster than they open up new ones.  When you think about it logically this is completely natural that this point would be reached eventually. 

Challenges or Opportunities?

I notice many societal challenges the common thinking is automatically to assume they are insurmountable, and to dread how they will lead to a lower standard of living. For example affordable housing/lack of available housing.

A guestimate from me is Britain needs 2 million more housing units across the country over the next decade to meet current housing shortage and the housing needs of the 2.5 million net population growth expected. At least 1 million of these houses in Greater London. If half of these were my favorite, 15-20 story condo buildings with 150 units in each building, so 500,000 units in London, that would require 3,300 of these buildings to be built in Greater London. I believe in building these condo towers right clustered on major public transportation links.

An additional 500,000 housing units could be built in new suburbs expanding into the green belt. Since Greater London already has around 4 million housing units, this isn't that bad of an expansion.

Anyway the point is the number of jobs this would create in constructing these 1 million housing units in London. From architects, to engineers, to building supply firms, to transport companies, to construction trades, to infrastructure related expansion work. Its sad but in economics that growth is what gets the money flowing. With all those guys employed in good jobs, they in turn would go out and spend the money. For a nation with millions of unemployed and a housing shortage it seems a no-brainer.

Stem Cells and Regenerative Medicine coming paradigm

-Stem Cells and Regenerative Medicine-  This is the garden of eden of unpicked orchards.  In the long run, you take an elderly person and extract adult stem cell from an organ in their body.  You then isolate healthy cells that have not mutated through damage through time.  And you reset the telomeres on these isolated stem cells.  At this stage you can also insert the genetics that you want into these stem cells.  This will combine nicely with genetic engineering.

In Bioreactors you replicate hundreds of millions of these young, healthy stem cells.  When that is completed you filter out the bad replications you made, and keep the healthy ones.  Then you inject or use some other method to insert these cells into the elderly person's organ.  As the elderly person's cells die as usual, and this depends on the cell type, the young, healthy stem cells will replicate themselves and rejuvinate the person's organ.  You do this across all cell types in the body, and it is rejuvinated from a cell replication perspective.  This isn't a cure all for aging by itself, but we are talking a huge advance.

There is fears that resetting the telomeres could increase cancers.  But I feel this is wrong, young people have these healthy cells with long telomeres left, yet are far less likely to get cancer.  I believe most cancer is a failure of the immune system.  This is why you see AIDS patients getting cancers.   

An 80 year old with whole body replacement of the adult stem cells, would actually have healthier stem cells than a 30 year old.  Literally have younger cells.  Of course after hte original batch of elderly people were treated, the plan would be to do it on a more regular basis.  People wouldn't wait until 80 to get going on these procedures, they may start at around 50, and reset the clock.

Paradigms in history of health advances

There isn't that much the industry can do at this point.  They went all out with huge research spending over the last decade.. and didn't get much.

Longer patents and higher cost per drug are not really reasonable.  The issue isn't funding for research.  They could double research spending and I doubt they would find anything more.  Its not like they are aware of a promising area but not funding it because of lack of funding.

But while it is the end of the pharma-chem paradigm, its not the end of progress for health technologies.  Stem cells are nearing commercialization for the first treatments.  Several nanomedicines are in trials.  And genetic engineering has been successfully done in research programs.  Progress is being made on the vectors for the new genes to enter the dna strands.

There have already been a number of health paradigms since the enlightenment, each reaching near its full potential.  To name some of them..

-Vaccines- eliminating the big 7 scourges of mankind.  Now new vaccines are for obscure targets where the benefit of widespread vaccination is highly questionable.

-Public Sanitation/Public Sewers- You can imagine how bad the disease was when they threw their sewage in the streets.  Today I don't know of anywhere in the developed world where raw sewage flows.  One of the great breakthroughs was when Doctors began washing their hands before giving birth.  A shocking change in the death rate of infants.

-Antibiotics- This really was the big breakthrough of the pharma-chem paradigm.  Penicillin is still amazing how many ailments £5 pounds worth can cure. 

-Cheap Protein/Public Nutrition -Europeans are tall, healthy and intelligent in good part because of the amount of protein and fortified nutrients they get growing up.  Probably 100% of the UK population has enough money to get the minimum protein required for healthy growth of the organism.  On the other hand this is slipping in recent decades with the regulators being asleep at the wheel.  Sugar, excessive salt, many fats should be taxed and or regulated out. 


So what paradigms are coming down the road?  I will cover that in the next threads.

Drug Firms Face Billions in Losses in '11 as Patents End

http://www.nytimes.com/2011/03/07/business/07drug.html?_r=2&ref=business
By Duff Wilson

 At the end of November, Pfizer stands to lose a $10-billion-a-year revenue stream when the patent on its blockbuster cholesterol drug Lipitor expires and cheaper generics begin to cut into the company’s huge sales.

The loss poses a daunting challenge for Pfizer, one shared by nearly every major pharmaceutical company. This year alone, because of patent expirations, the drug industry will lose control over more than 10 megamedicines whose combined annual sales have neared $50 billion.

This is a sobering reversal for an industry that just a few years ago was the world’s most profitable business sector but is now under pressure to reinvent itself and shed its dependence on blockbuster drugs. And it casts a spotlight on the problems drug companies now face: a drought of big drug breakthroughs and research discoveries; pressure from insurers and the government to hold down prices; regulatory vigilance and government investigations; and thousands of layoffs in research and development.

My comments:  The pharm-chem paradigm is running out of steam. The low hanging fruit has been picked, an the big, easy money made. Now its a declining number of new drugs. Same thing happened in an earlier era with vaccines.

But its not the en of the road for health technologies. Rejuvinative medicine; stem cells and related.. looks just huge in its potential, even bigger than the pharma-chem paradigm. There is also genetic engineering which is in its infancy. And there is nano-medicine which is also in its infancy.

Unfortunately I camee to realize the great names in Pharmacueticals will never make the jump to a new paradigm. They will stay making drugs, even as that business becomes about generics. New companies that don't even exist now will become ten billion dollar a year companies in the new fields.

Problems with NIMBYism

When a NIMBY blocks a development it causes a lot of negative impacts:

-Families are denied housing. Sometimes this means families never even forming in the first place
-All the workmen who would be working buildig the houses, are never hired
-Allt he workmen to build the infrastructure like electricity, water, roads.. never hired.
-Rising prices for existing housing, causing a transfer of wealth from young to old


Less work being done and less wealth for the society, means lower tax revenues and therefore lesser services. For example that workman making good money operating machinery is a net tax payer. On the other hand in NIMBY utopia he is unemployed and collecting benefits. This difference in tax revenues can be used to fund things like libraries or recreation centers.. or Gaelic translators.

To make a long story short, NIMBYism is one of the main, if not the main cause of our economic stagnation.

In America 99% of the mortgage market is state backed now

50% of marriages end in divorce, huge percent of people end up disabled, job loss is real and growing every year.  So sort of suicidal to lend to the average person over any long time horizon.  Unless it is like 50% down.

In the 20th century you could be reasonably sure if someone lost their job they could easily replace it with a similiar paying job.  In the 21st century its a different game.

That is why my contention is that lending is increasingly going to be to states and corporations.  The consumer credit market is going to fade away.  It will still be there just a lot smaller percent of the whole.  Its like credit card debt, the big banks are trying to get out of it.  Because they aren't making money on it.  Soon it will be something more reserved for their premium clients.

Without consumer credit what is going to drive the economy? .. state spending.  Look even in Britain in just the last 2 years the number getting housing assistance rose by 500,000. 

Engineering versus bean counting

Here is the different mentality.  German geniuses are working on automated systems to avoid accidents.  Soem already out are anti-lock brakes and electronic stability control. But coming is lane detection software, automatic braking for rear ends, object sensors that detect cars in the next lane and do not allow the car to run into them.  Also automatic parking is coming, that could avoid a lot of minor collisions which cost a lot of money to fix.

In anglo-saxon nations we put our geniuses to work on actuarial tables, calculating different premiums for say a 5'7, lesbian, Irish woman who is 38 years old.  Versus a 37 year old black man, 5'8, manchester city fan.

And yes our actuaries make at least as much money as those German engineers.  But the engineers are working towards a permanent solution to the problem.  While the actuaries are useless middlemen, collecting money but not changing the situation.  No matter how many actuaries you have there is still the same number of accidents, and the same number of claims.

Manufacturing growing at fastest pace in 7 years(USA)

http://finance.yahoo.com/news/Manufacturing-growing-at-apf-689542114.html?x=0&sec=topStories&pos=6&asset=&ccode=

The rebound in manufacturing is gaining momentum, the report showed. The new orders index rose to a seven-year high. A measure of order backlogs rose to its highest level in a year. And inventories are shrinking, both at manufacturers and their customers. All are signs that factory output is likely to keep growing.
"The recovery in the sector is both robust and on track," said Ian Shepherdson, an economist at High Frequency Economics.
Solid growth overseas, particularly in developing countries such as China, Brazil and India, has also helped by boosting exports. A measure of export orders rose to its highest level in more than 22 years.

My comments:  US recovery is starting to look real and like it is gaining momentum.  They should be nearing the economic high mark of mid-2008 soon, and breakng into new territory.

They've got a lot of major industrial corporations seeing heavy orders coming in from the developing world.  Deere, GM, Ford, Boeing, CAT, GE.  And internal companies who were putting off upgrades and replacements are now coming in with big time orders.  (which creates a virtuous cycle). 

Tech is very stong right now too.. Intel, Microsoft, Oracle, HP, IBM, Dell, Apple.

QE 2.0 is working too, big end demand comes in, US dollar devalues to a more approriate level, and so far no inflation.

Waiting Lists For German Cars

[b]Bloomberg[/b]
http://www.bloomberg.com/news/2011-02-08/audi-buyers-wait-months-as-factories-at-full-steam-struggle-to-keep-pace.html
[b]Audi Buyers Wait Months as Factories Struggle to Keep Up With Orders[/b]
By Cornelius Rahn

[quote]Audi AG buyers must wait an average of three to four months for cars like the $52,700 A6 sedan as the company runs factories at full steam in an effort to keep pace with record demand, sales chief Peter Schwarzenbauer said.

Customers at BMW, the world’s biggest luxury-car maker, must wait as many as three months for most models and as long as six months for the overhauled X3 sport-utility vehicle, said Birgit Hiller, a spokeswoman for the Munich-based company.
[/quote]

My comments:  No discount selling for them.  Want a German luxury car?  Put your non-refundable deposit down now, pay full retail, or above retail price, and wait 3 months.  Oh ya, and suck up to the sales staff at the garage.  Actually this attitude is how our estate agents were so successful over the last decade. 

In the depths of the great recession Mercedes had slow sales on some of their cars.  So they did the typical Germanic response and [i]raised[/i] prices.  Sales picked right back up.

Real capitalism versus 'debtalism'

Agree 100%. Real capitalism.. the successfl kind is what Germany is doing. Gradual but relentless build up of industrial capital. You take out bank credit to expand productive capital, then use that capital to pay off the loans. Over time you get a whole fleet of capital plants.

And re-investing profits into more capital plant and capital in the form of research and development.

What I see in the US And UK is what I call 'debtalism'. Loading every company and person's balance sheets up with debt. So more and more of the revenues are going to simply pay interest on debt. And making it a ponzi by inflating asset prices with all this debt, so on paper there is a lot of 'capital'.

One path is the virtuous path to wealth. It takes a lot of hard work and a lot of time to build up. One is the get-rich-quick plan. Flip-this-house is a lot easier than build this house.

Uk Leaders Nearing Zugzwang?

Its remarkable how the USA and the UK economies have diverged recently.  In the USA which allowed the housing collapse, inflation is at ~1%.  It is hovering at the 50 year low.  This after QE 1, and half way through QE 2.0.. and of course lowering interest rates to 0-0.25%, and running a budget deficit of 12% of gdp.  In addition the USA also has some nice GDP growth right now, running at around 3%. 
If needs be the federal reserve and treasury in the USA have huge room left to print and borrow money.  Like well into the trillions of dollars of room.  (Which they will need a lot of money to bail out states, and keep unemployment benefits going, and throw in some stimulus)

Meanwhile in the UK things really are looking bleak.  ~4% inflation right now, with it rising.  The economy shrinking at ~1% a year.  If inflation does keep rising the government will have to take steps to reign it in.. except they are in zugzwang, they can't reign it in, because the country is on the edge of a loan default death trap.   

Flashback early 2009.. Why I supported Brown's massive printing, was I noted if we allowed a cascading default on the loans, the UK economy would definately collapse.  See what happened with Ireland when they chose that path, and because they don't have a central bank to print the difference.  Meanwhile if we printed it *might* still lead to a collapse but the immediate collapse was avoided.  Then in the intervening time carry out a massive systemic reform.  (which not even the slightest reforms have been made).  The Coalition is instead debating mandating more gender equality on corporate boards.   

But now they face a dangerous situation.  If they keep printing now inflation could blow out of control.  If they don't keep printing, the falling economic activity would lead to a cascading default on loans.  I think in that situation the government will have to keep printing.. even if inflation was running at 30% a year.  This would inflate away the debts, and inflate away the pension promises.  (just lie about the real inflation for the purposes of indexing.)

Some thoughts on automated checkout machines

On of the things with the automated checkouts is they are available all the time. A human worker works 40 hours a week. But these stores are ofen open 7am to 10pm, 7 days a week.. or 105 hours a week. The human worker also has sick leave, 2 weeks a year, vacations, probably 4 weeks a year, maternity leave, statuatory holidays off. And then there is the growing long term disabilities.

And even when you get the human worker to work, getting them to actually work is hard. Its amazing to go into stores with long queues and seemingy tons of staff working, but only a couple at the till. Working at the till taking customers one after another is hard, so employees find a million reasons to not be at the till while they are there.

Meanwhile I've seen stores now with 8 automated checkout lanes(2 batches of 4). 7 out of 8 were operational. One down due to 'technical difficulties.'

This is a huge selling feature for stores, if you know when you go there there will be little to no wait time. Whereas some stores I've seen it is like a 15 minute wait at times to actually pay for what you chose.




Yes most retail chains either have to get big and offer everything like the big boxes, or go down to the big boxes.  Either way we end up with the vast majority of volume going through big boxes.

The automted checkouts give Tescos and friends a big advantage as its capital investment.  If a company has 1,000 stores and plans to install an average of 4 automated checkouts per store, that is 4,000 units.  Now economies of scale in rolling out these things come into play.  They can even test upgrades at a few locations and see how things work.  Say the units are £100,000 each time 4,000 units, that is a £400 million order.

It is the industrialization of retail.  Automated warehousing and automated shelf stacking are further out but coming.  Another thing is ordering, they already have what they are selling linked up in the human tills computer scanning system.  So the system can see what is selling faster and automatically place orders for more. 

And of course using intelligent software to figure out pricing on the fly. 

How cheap things can be with mega scale production

In Britain some scientists were attempting 'pedal powered' electricity for workplaces.  And attaching it to exercise for a healthier workforce.  If you look what an average man can sustain in terms of output, it is around 150 watts per hour, over an 8 hour day.

So over a 40 hour work week the person could output 6 kilowatt/hours.  The average price of electricity in the United States is 10 cents a kilowatt hour.  So after a week's worth of output the person could collect 60 cents.  Of course the actual wholesale price of electricity is cheaper still, more like 3 cents a kwh. 

So the person could wholesale their weeks work for 18 cents. 

This also shows how idiotic the idea is that we could return to an animal and human powered world.   

My advice to average IQ young people

A common denominator in the plan of public servants on very generous pensions, boomers who made stupid gains on their houses, bankers with their loans..

Is that the younger generations will have to work and produce wealth for decades, while all those people will take the vast majority of that production for themselves.  It is all essentially promises to pay themselves based on the future production of young people.  Pensions are numbers in an actuaries account right now, housing equity is on paper. 

That young person working hard at Tescos for neo-slave wages.. supports a whole host of parasites who are making money off their labour.  From the shareholders in the company, to the sales taxes, property taxes, fees and so on that go to support wealthy government workers, to the bankers loans to Tescos.

My advice to young people is simply drop out, unless they really make it worth your while to go into work.  And not promises of maybe future good opportunities, or good pensions 30 years from now.. I am talking some real money on the table - today.  Otherwise go on benefits, have a bunch of children, enjoy life, like public parks, friends, time with the children.  In 100 years no one is going to care less if a young woman was an assistant manager at some douche bag company.. but her great grand children will remember her.

This attitude of demanding to make it worth my while, or I take my ball home has served me well in life.  Its the opposite of the beta-desperation-pity attitude. 

Productivity and real median income

An argument is that baby boomers were an exceptional period where the middle classes did well, but now we are returning to a historical norm of most people being impovershed and a few super rich people. 


Its rational that the boomers would live a lot better than previous generations. Because between the late 1800's and the 1960's there was a 10X improvement in productivity. Combustion engines for farm combines and transportation.. electricity.. mass industrial production were some of the big advances.

As that good post said since 1980 even at a ~1.8% a year productivity improvement which led to a 70% improvement in productivity in that time. Not as fast as during the first half of the twentieth century.. but still constant respectable progress. Just look at steel mills, container ports, automobile production, data handling progress over the last 30 years for examples.

So today's young should be earning 70% more in real income than their parents at the same age. All else being equal, (like the richest 1% still getting the same percentage of the national income).

Instead today's young are only making 50% of what their parents did in real terms. And falling fast.

Las Vegas Sands plans €15bn gambling hub in Spain

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8331398/Las-Vegas-Sands-plans-15bn-gambling-hub-in-Spain.html

By Jonathan Sibun

Spain's economy has been handed a welcome vote of confidence after US casino operator Las Vegas Sands revealed plans to build a €15bn (£12.6bn) Iberian gambling hub that could create as many as 180,000 jobs.

 

Is this part of the turn in Spain's economy. Now we're talking some real money.

A couple months back Spain also told its green energy companies and investors it won't be paying the rate it contractually agreed to for solar and wind generation. Some multinationals stand to lose basically billions of euros worth on those deals.


Greece is also showing signs of turning the corner. They made some huge deals with the Chinese state owned companies on shipping deals. The Chinese see that Greece can be used as a entry point for masses of product moving into Southeast Europe and also as a trans-shipment port to move Chinese goods into the Mediterranian countries.

The Greeks were talking about selling their ports and rail corporatiosn to the Chinese state owned companies. And the Chinese talking about expanding that infrastructure and setting up a network of warehouses and trucking points within Greece.

Prediction for jobs over the decade in the UK and solutions

Not enough work to go around.. and the rare time when there is actually demand for something, like beautiful new clusters of condo towers in London, the society is almost violently opposed to allowing it to go forward.  Construction being one of the last bastions where lots of human labour is needed.  It won't be automated for some time to come. 

My estimate is over the next 10 years the employment in Britain will decline by 5 million.  From 29 million to 24 million. 

Society needs an answer to this growing problem.  The elites response so far has been to deny there is a problem.  There are a number of possible solutions:

-Mass public works, from picking up litter to tending gardens in parks, to artwork, to infrastructure - I think this is what New Labour effectively did with the non-jobs.  Except instead of positive things, they added people to watch the CCTV cameras, and people to watch the people watching the CCTV monitors.

-the French solution of shorter working weeks, longer vacations, earlier retirements

-my personal favorite of a citizen's dividend so people can have their basic living costs met and try out ideas for extra cash

German industrial corporations

Look at these big companies from wikipedia:

Siemens:  405,000 employees   75 billion euros revenue
VW:  368,000      100 billion euros
BASF:  104,000   50 billion

Daimler:  256,000  78 billion
BMW:  96,000  50 billion
e.on:  88,000  81 billion

RWE:  70,000  47 billion
Bayer:  108,000  31 billion
ThyssenKrup:  177,000  42 billion

Between these 9 they have 1,670,000 employees and 554 billion Euros in revenue.

Egypt's development under Mubarak

I do not believe Hosni Mubarak was that bad of a leader. Egypt was showing steady development. The statistic I follow most is electrical production. Britain's stagnation in living standards over the last 30 years has been met with a stagnation in electrical production. In 1980 when Hosni Mubarak came to power Egypt produced 18 billion kilowatt hours a year. Britain was a world leader at the time in electricit and produced 264 billion kwh a year.

By 2008 Egyptian power production has risen to 123 billion kwh. A 680% increase since 1980. British power production had risen to 361 billion kwh


http://www.google.com/publicdata?ds=wb-wdi&met=sp_dyn_le00_in&idim=country:EGY&dl=en&hl=en&q=life+expectancy+egypt

Another statistic is life expectancy.  On this front Egypt went from a life expectancy of 56.6 years in 1980 to 70.1 years in 2008.  Nearing first world levels.


http://www.google.com/publicdata?ds=wb-wdi&met=sp_pop_totl&idim=country:EGY&dl=en&hl=en&q=population+egypt

The population of the nation increased from 44.4 million in 1980 to 82.9 million in 2009.


This rise in population meant that the per capita electrical consumption increase was 364% over his 30 year reign.

99% Of New Us Residential Mortgage Approvals Are Going Direct To Govt Sponsored Entities

http://us1.irabankratings.com/pub/IRAMain.asp



M
y comments:  It had to move from the private players to the state.  As technology makes more and more people obselete for employment it is getting riskier and riskier to make loans to individuals.  The only way would be much higher interest rates charged to individuals to compensate for the risk.  Which would cause a much larger fall than we've already seen in house prices.

The big banks already are getting out of the mortgage game in most industrial nations.  The new game is all about big time corporate lending.  While incomes of your average person are unstable and flimsly, a comany like Coca Cola you can lend billions to.  If you look in detail at the big banks balance sheets, mortgages are a shrinking part of the total. 

The other one banks are getting fed up with is consumer credit.  Its a small and shrinking part of their books as well.  I wouldn't be surprised to see the big banks practically get right out of consumer credit over the coming decades.  Leave it to little fish at scam interest rates.

Otoh say its a big oil company looking at spending £5 billion pounds developing an oil field complex in Ghana.  Then the banks are interested and the company has real collateral to back it up, and stability of income. 

If you inspect the recent earnings disclosure from the largest US banks, what you find is that 99% or more of new residential loan originations are going into either FHA, Fannie Mae or Freddie Mac subsidized risk buckets. There is minimal private mortgage origination and private securitizations are non-existent, thus one wonders about the happy atmosphere at the Asset Securitization Forum Convention in Orlando. What's more, even though the overall mortgage loan market continues to shrink, the balance sheets of Fannie and Freddie are growing, especially loans held for the portfolio. In the case of Fannie, to over $400 billion at Q3 2010 vs. $250 billion at the end of 2009. The defaulted loans are held at cost, BTW.

Much of this increase in the size of Fannie's balance sheet is repurchased defaulted loans from securitization trusts, grim evidence of the generosity of Secretary Geithner in letting Bank of America ("BAC"/Q3 2010 Stress Rating: "C") off the hook for mere single digit billions in terms of loan repurchase liabilities. The taxpayer will have to pay the cost of this gift to BAC shareholders, with interest. But excluding this inflow of financial detrius, the balance sheets of the zombie GSEs would be shrinking on ebbing industry new loan origination volume. The run-off from existing RMBS portfolios is so brisk, we hear in the servicing channel, that a prolonged drop in new origination volumes could see the mortgage sector shrink dramatically in 2011 and 2012, this as loan repurchase volumes hopefully slow.

How much room the US has to bail out states

What determines the limit is when the printing and borrowing of the federal state reach a point where inflation starts going beyond the normal range. What happens in normal times is 80-90% of the credit expansion is through the private sector. So the federal government cannot borrow too much without driving up rates.. and at the same time with the expansion in the private sector there is juicy new revenues coming in that smooth over any problems.

For bailing out states it looks to me like there is no limit anytime soon for the federal government. Because in the USA the states only have a total of 1.1 trillion in debt. The federal government has other bigger concerns for the deficit, it looks like it will run like 2 trillion just this year.

Because economic growth and technological progress is an exponential function, there is going to be more and more room to print each year. The US government wants the private sector to pick up and take things on its own, and then bring down the deficit when the private sector is flying high. As long as the problem is just a private sector deleveraging as the root of the problem, then the situation is always under control.


However it appears to me this crisis will seperate the men from the boys. Like Britain is trying to use the same strategy as America and the EU, but we are seeing UK inflation is creeping up, nearing getting out of contol. That is when you start asking is this more than just a private sector deleveraging? A good example to clearly show it is Zimbabwe. That nation took away the farms from the white Rhodesians, and over the following decade it led to a greater than 80% decline in food production. The country's main export. If the money supply even remained the same, but production hugely fell there has to be inflation. Same amount of money chasing less goods.

Thats what scares me about the UK, our business and government leaders have chased so much production out of the country, that it can be that same amount of money chasing less goods.

The US has a further advantage, in that so many nations purposely buy US dollars to prop up the dollar and build reserves. So that could be one change, if in the future nations turn away from the US dollar, the US would be in a much tougher situation.

In the case that a nation is having inflation getting out of hand, and there is defaults going on.. then it has no choice but to let defaults go forward.. and make cuts. Probably would never happen in a democratic society though, no politician is going to deliver painful cuts to anyone. The Tories show that clearly, running and elected on a cutting campaign, and still not going to do it. So the likely case then is either partial default, turn to the IMF, or hyperinflation.

Don't belive the Peak theories.

Peak oil, peak gas, peak uranium, peak phosphate, peak lithium, peak coal, peak food, etc.. they are popular online theories, but they are consistently wrong.  Basically they make a fundamental mistake in the idea that using today's technology extraction will peak by such and such a date.  Which is often true, for example in oil if the industry was still using technology from 1980 and only developing the type of fields developed in 1980, production probably would have peaked in about the year 2000.

So lets look at oil..

Global bpd production in 1980:  63.9 million
1990:  66.3 million
2000:  77.7 million
2009:  84.3 million

Does that look like its peaking?  I see solidly rising production. 

What about natural gas, there has been quite a bit of fear in the UK about the future of natural gas, because in many ways it is the primary energy source of our nation now.  It fuels 40% or more of electric generation and heats a growing percentage of houses.

Global output in trillion cubic feet:
1980:  53.3
1990:  73.7
2000:  88.3
2009:  106.4

Again I'm not seeing any peak there.  Instead solidly rising production.  What I do see is elites telling the average person to accept a much lower standard of living because allegedly teh world is running out resources.  (while the same elites live a bizarrely extravagant lifestyle). 

Only 3% of new jobs permanent(UK)

http://www.dailymail.co.uk/news/article-1352333/Part-time-work-Of-200k-jobs-created-year-3-time.html#ixzz1Cf548SAs
By Simon Duke

Desperate job hunters are increasingly being told: It’s part-time or nothing.

An astonishing 97 per cent of posts created since the economy came out of recession are of limited hours.

This means only 6,000 of the 200,000 jobs to have come up in a year pay a full-time wage.

The worrying findings, by a respected think tank, raise the spectre of a sluggish recovery with legions of workers having to accept a so-called ‘McJob’ to make ends meet.

My comments:  British managers definately don't follow the Edwards Deming principles of management. One of them is to not do temporary contracts and create an environment of fear and short termism.

If someone is on a 6 month contract and probably will be working elsewhere in 7 months.. is that person going to work towards the long term improvement and advancement of the company? Are they going to be relaxed and confident in their position and willing to take risks?

Its these classic mistakes.. the victorian factory owner mentality that caused Britain to lose almost all our manufacturing companies. This kind of looter mentality works well when you are only competing against others doing the same.. but when you face an opponent like German industry where they are co-operating together and the workers feel part of the team and proud of the products, the old victorian era management style gets smashed.


The victorian era factory owner asks how can I save £1 pound an hour across 2,000 workers.. now we're talking some real money. But in the moden era of robots and engineering quality, this same mentality is dangerously out of date.

Technological progress versus transformative nature of applications

I generally agree the impact of technology has not been as transformative over the last 30 years compared to some eras, like the unbelievable advances with electrification and motorized vehicles and equipment.

I think the progress of technology is still going at pace, just it has to get applications that are transformative.  For example I believe we will see human level AI robots by 2040.. that would be bizarrely transform society.

Virtual reality/virtual worlds are having a large social impact already.  Sooner or later I think they will lead to a monumental transformation in society.  Already for millions of people their World of Warcraft life mean more to them than their real life.  The transformation will be when a majority of people place more importance on a virtual life than a real one.  And its coming sooner or later, as I have argued in the long run the virtual world has absolute advantages.

Health sciences is another.  There is notable achievements over the last 40 years, but certainly nothing has transformed society like vaccines, antibiotics, public sanatation, better nutrition.  However with stem cells, gene therapy, nanomedicine as these mature in the coming decades, we could see radical advances.  Like starting to rejuvinate older people to a youthful state.

Peter Thiel recently argued that there is defaults on pensions and investments going downhill because technological advance has not been as fast as anticipated 20 years ago. 

Is belief in progress blind faith?

Is belief in progress blind faith when you do not know exactly how the progress will be achieved?

Let me give you an example with electrical production. Most on the left were predicting the world would produce less electricity in 2008 than in 1998. Because of finite resources running out. I looked at the long term average and simply projected it forward. Is it blind faith.. I'm not so sure, if electrical production grows at 2.7% a year, year after year(even with primitivists saying it cannot go up every year, including many esteemed intellectuals).. is it blind faith to guess another 2.7% growth for the coming year?

The ways in which we will increase production are unknowable from any point in history. How will computer engineers in 2025 produce a 50% increase in performance that year? I can take wild guesses, but I do not know. But I think it is wrong to say becaue we do not know how they will increase production then, to make the jump and say therefore they will not be able to.

In 1998 world electrical production was 13,663 billion kilowatt hours. I predicted my usual, a 2.7% rise in production per year. Because that is the long term historical average. So my prediction was for 2008 production to be 17,830 billion kilowatt hours. Back then everyone I told said it wouldn't happen, because of limited resources.

The numbers are out for 2008 now, the world production was 19,103 billion kwh.

Michael Lind at Salon.com article

America in the age of primitivism

http://www.salon.com/news/politics/war_room/index.html?story=/politics/war_room/2011/01/18/michael_lind_primitivism

And then their people suddenly got tired of modernity and tried to crawl back into the past.
On the left, technological optimists were replaced by Rousseauian romantic primitivists. In the 1970s, Green guru Amory Lovins promulgated the gospel that “hard” sources of energy like nuclear power are bad and that called for a “soft path” based on hydropower, wind and solar energy. Other Green romantics decided that even hydropower is wicked, because it is generated by dams that despoil the prehuman landscape.

My comments:  One of the best articles I've read.  How the right and left politically have lost the belief in the power of progress.  Like favoring small organizations which can't do much, versus huge bureaucratic organizations which can accomplish radical change. 

An exampleis how the modern left is reflexively against GMO foods.  Yet GMO foods would be something 1930's to 1970's New Deal liberals loved.  A way to increase yields, increase nutrition, using the power of science, leading to less hunger, cheaper food and the ability to return farmland to wild nature. 

I think the decline we are seeing in America and Britain is related to this change in belief in progress.  Like why are modern leaders pushing energy of sun and wind that humanity used in the 13th century, instead of nuclear power, the breakthrough energy technology of the 20th century.  It is primitivism.

Coming wave of Municipal and State Bankruptcies

The New York Times
U. S. Path Is Sought For States To Escape Debt Burdens
http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?hp

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

My comments:  One of America's great strengths is its bankruptcy laws.  Which allow for an orderly default on liabilities, without wrecking the integrity of the organization defaulting.  Hence how General Motors is back as a fierce competitor in autos.

The Vallejo California bankruptcy was historic and looks to me like it will be used as the precedence for the coming wave of municipal bankruptcies and state bankruptcies.  In fact likely most cities and states will go bankrupt over the next 10 years.

The judge in the case ruled that Vallejo has a duty to provide basic services to its citizens and only after that is properly paid for will remaining monies be split between the creditors.  Which he ruled a default on the pensions and for the bondholders they are likely to get between 5 and 20 cents on the dollar.

States and municipalities are notgoing to be forced to cut services to nothing while still paying pensions and bondholders.  Instead when they can no longer comfortably afford to pay both, the court system is going to let them legally default on their debts.

This is going to make a stronger and healthier America, instead of going down a downward spiral.. but obviously pensions and bondholders are ---cked.

Internaional Energy Agency December 2010 report

http://omrpublic.iea.org/currentissues/high.pdf

It looks to me like the peak oil fear of the peak in 2005 is now clearly being surprassed.  And looking to push substantially higher through 2011.  I also believe there is near endless demand as the developing world keeps moving forward.

Global oil product demand for 2010 and 2011 is revised up by an

average of 320 kb/d

buoyant global economic growth and cold northern hemisphere

weather. Global oil demand, assessed at 87.7 mb/d in 2010

(+2.7 mb/d year

Global oil supply fell by 0.3 mb/d to 88.1 mb/d in December

, as non‐

OPEC output was reduced, on short

pipeline leak and a fire at a Canadian oil sands upgrader also cut

January output. Overall, 2010 and 2011 non

unchanged at 52.8 mb/d and 53.4 mb/d, respectively. OPEC NGLs

contribute 5.3 mb/d in 2010 and 5.8 mb/d in 2011.‐lived outages. An Alaskan‐OPEC estimates areon higher‐than‐expected submissions, reflecting‐on‐year), rises by 1.4 mb/d to 89.1 mb/d in 2011.

My comments:  Natural gas liquids is a growing part of the picture.  Especially in Opec nations which are taking the gutsy decision of making the huge capital investments to bring these 'trains' online.  Non-conventional oil is where most or all of the future gains are going to come from.  Deep sea oil like in the gulf of Mexico, offshore Brazil and offshore West Africa, NGL like in the middle east, and tar sands like in Canada and Venezuela.

Number of Young American men out of work

This is Stuart Staniford's blogspot, I always learned a lot from his posts on the oildrum.
http://earlywarn.blogspot.com/2011/01/employment-for-young-american-men.html#more

The graph above shows the employment-population ratio for men since then, broken out by age. You can see that for all the groups below age 55, employment opportunities fell sharply between 2000 and about 2003, then recovered slightly until 2007 -- but not to the 2000 level. Then they fall sharply in the great recession and have pretty much barely improved at all since then.

The one exception is the age group 55-64 who increased their participation through 2007, but we probably should see this is a sign of societal stress also - less ability for men to retire early.

Ranulf comments:  That last graph is young black men.. down to just 1 in 3 of them working. It is amazing the contrast when you think about it, older people in western societies living a great retirement on generous pensions, their house paid off, going on nce vacations and generally enjoying life. But for the younger generaton not even a job to be found, and the future is honestly a life on subsistence welfare.

But the vast majority of voters are still those older people, who the mainstream ideas are working just fine for.