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kaleberg
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People tend to distrust the experts when their share of the pie keeps shrinking. People will put up with fairly corrupt experts if some of the graft trickles down to them. Whole cities, even nations, were run on that principle. Corruption, of course, is one of the charges made when the experts fail, but it is only part of the story. Look at Europe in the 14th century. The whole area was run by an international elite, an aristocracy divorced from location and a church similarly without roots. When the plagues, famines and political instability started, that international elite lost its credibility and we saw nationalism, rooted in location, language and ethnicity, on the rise in Scotland, Switzerland and Flanders. By the 16th century, Europeans were ruled by local elites and international religious authority much weakened.
Toggle Commented yesterday on The Real Lesson From Brexit at Economist's View
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Are they using height as an indicator of food supply? In modern Africa, farmers are taller than hunter gatherers. It is perfectly possible to have a well fed society of people shorter than the modern Dutch. If you are looking at heights, you have to consider that there is more than one reason someone might be short or tall. Granted, height requires both a genetic propensity to grow tall and adequate food to enable such growth, but lack of height may be a result of genetic propensity or lack of adequate food. It is quite possible that there was one group of tall hunter gatherers after the ice age, but then a group of shorter farmers moved into the area. There seems to be an implicit argument that persistent food shortage selected for shorter people who were more likely to have children survive in the face of a straitened food supply. This implies that a genetic propensity to be taller is also associated with a requirement to be taller in order to reproduce. That is, someone capable of growing to 6' in height would have a lower chance of reproductive success than someone capable of growing only to 5'6" in the face of the same food shortage. Without adequate food, neither party will grow to his or her potential height, but it is not clear that this failure to achieve potential height would have the necessary differential effect on their ability to have their children reproduce. It is quite possible that someone of Dutch ancestry given only some fraction of optimal nutrition would have more problems reproducing than someone of Nepali ancestry similarly deprived, but the biology is not there. We don't know, and we aren't going to do the experiment necessary to find out. (At least I hope we aren't.) I'm guessing that the genetic propensity for height is driven by all sorts of factors and has limited impact on reproductive success.
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The reason US workers were once doing so well was simply that they had unions with political and economic clout. Most of those unions were in the manufacturing sector, and it is those unions that have been hurt the most. Globalization allowed manufacturers to move production offshore without worry about tariffs and other non-tariff restrictions like those in China, Korea, Taiwan and Japan. Needless to say, wages and benefits in what remains of manufacturing in the US have collapsed. Immigration helped prevent unionization in other sectors, the low end services industry and agriculture. There was an able and ready supply of workers who would accept lower salaries and lacked any political rights or recourse when wages were stolen or work was unsafe. Since the focus of enforcement was against immigrant workers and not their employers, they never developed the clout of earlier generations of immigrants.
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This might be a reference to Thatcher and her heirs' anti-union policies. There's also the crummy school system which is now making it harder for anyone to even get A-levels which has to be great for economic mobility. There's immigration which does hurt wages at the lower end of the wage scale. There has been a lot of outsourcing. There's the London Only approach to prosperity where nothing is being done for any place but the nation's economic center. Nine out of ten of the poorest areas in northern Europe are in England, and that's not because England is full of goof offs and the like.
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I suppose it is a pity that London can't remain in the EU, but let England leave. That would be more true to the vote. Given how poorly England has done compared to London, I doubt most people will notice any particular increase in impoverishment.
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I wonder if anyone outside of London will even notice that structural recession. Most of England has been in a structural recession since the late 70s. Nine out of ten of the poorest areas in northern Europe are in England. Will Brexit really make them poorer? Is it really going to do more damage than fiscal austerity? Ironically, London is going to do very well out of this. As others have noted, Brexit weakens any EU attempt at increasing regulation of London's financial industry. The losers will be Panama and the Cayman Islands. Worries about manufacturing seem rather odd. Does this mean less outsourcing to the poorer regions of the EU? That will be a real blow to Manchester and Leeds. I do understand the gut revulsion against many of the racist backers of Brexit. They are loathsome scum. I just can't see 55% of England and Wales as simply loathsome scum. I just see desperation in the face of a destructive ideology.
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Wow, well said. That's more or less what I've been thinking as well. 2) Right. It was a bad day at the dog track. Ignored in all this was the soaring US dollar. Eventually, all that capital sloshing around is going to realize that it has to get invested in something, so prices will recover. Of course no one is sitting down, the music is still playing. 3) I like your diminishing returns fast food franchising metaphor. The EU started as a way for the more developed European nations to compete with the US. I read 'Le Defi Americain'. Then it started putting its name on cheap steaks and bogus real estate investment courses. (Wait, that was Donald Trump.) 5) That was the first thing I thought of when I heard that London was going to be destroyed as a financial center. Why? It's going to be an even better place to stash one's stolen billions. 7) Globalization never made much sense to me. At least colonialism was about ripping off colonies and letting colonizing nationals make a profit. Globalization is fairer in the way it rips off everyone, but that leaves it with a diminishing constituency. As Uranus found out, if you eat all your children, you don't have anyone to buy you a neck tie on Father's Day.
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"The small-minded burghers of rural England have managed to destroy trillions of dollars of value ..." Yes, but they haven't been getting any of that value. I can't imagine why they would care. It's all other people's money. It's not like they've been noticing anything that looks like a recovery since maybe 1975. Remember, England has 9 out of 10 of poorest regions in northern Europe, and the EU has not been covering itself with glory these days. Personally, I expected a tight vote with remain winning, but in England and Wales, it was a 55-45 blowout for leave. It wasn't even the traditional north and south thing with the old Bronze Age dividing line. It was London against just about everywhere else. I was surprised at this. I expected East Anglia to vote leave, but not Kent. Clearly the financial sector has not spread its largess much outside the city. I think London is going to remain a financial center, if only because it is lightly regulated. Like the Cayman Islands, London is a great place to park one's stolen billions and will remain so. With global instability, this will become even more important. I doubt it will do all that much good for the typical English citizen not connected with the financial sector. None of the parties are able to look past the existing power structure to find a place for developing the rest of the nation. A dominant financial center is a lot like a massive oil reserve. It makes a nation lazy and stupid.
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Given who funds so much economic "research", do you imagine that this is intentional?
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That's another good point. What I find interesting is how the income line at which the economy is working in your favor keeps rising. For a while, we just had the poor doing poorly. Then we blew out the working class / lower middle. Then we blew out the middle middle. Now, people making $300K are starting to get the shaft.
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Good point! I was wondering about that.
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My main thought about the Microsoft-Linkedin deal is that it reminds me of the various HP-Compaq/DEC/and so on deals. Microsoft doesn't seem able to boost revenue or profits by producing better technology, so they are doing deals like this instead. It is all about using clever accounting to make the bottom line look better for a while, that is, until they have to write off $100B in goodwill. (Look at all the newspaper companies falling apart. You'd actually think that the internet had something to do with it unless you read the 10Ks and realize it was just revaluation after all the mergers. Mergers are the finance equivalent of magic.) If I remember correctly, companies do have to account for stock options given to employees. There was a stink about this a decade or two back, and CEOs swore it would destroy Silicon Valley and innovation forever. They also swore that the increased accounting cost alone would quintuple to size of the accounting sector in the US. (I looked this up at the BEA.) Instead, it led to the modern practice of issuing stock options, then buying back stock to effectively pay for them. If you look at all the stock buybacks over the last ten years, they are surprisingly close to the stock options issued. I'm not exactly sure of the bookkeeping on this, but I doubt it is a coincidence, and as a satisfied investor, I don't plan on looking more closely than I have to.
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I think this effect is overstated. People tend to react the way one expects more often than not. Do you really expect poor people to not spend any increased income? Do you really expect businesses to invest when customers are buying less? Do you really expect rich people to give away all their money? Do you really expect businesses to reject revenue when consumer spending rises? They are called empirical expectations for a reason. It's like mathematics. There are all sorts of interesting holes in the theory at the edges, but in general mathematics is pretty solid. Despite Godel's theorem placing limits on provability, things like calculus, group theory, complex analysis and so on have held up remarkably well.
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That's a good point. The heliocentric system wasn't all that much simpler since it was based on circles, not ellipses. Solving the differential equations in Kepler or Newton's model is actually harder than tracking circular motion and requires more sophisticated mathematics. Using epicycles and eccentrics to fit the data is not much different from using a Fourier transform. In fact, tide forecasting still uses a system of epicycles and eccentrics, though they aren't called that anymore. They call them tidal coefficients. Computing tides from basic principles is hard since you have to model the flow of water over local topography. Another selling point for the heliocentric system was that it improved astrological forecasting. Outside of the field of economics this isn't very important these days, but the geocentric system did not allow one to assign a distance to Mercury or Venus, so one couldn't calculate their mystical forecasting value the way one could with the other planets.
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I'm using the term recession from the point of view of someone who gets paid by the hour. Ever since the late 1970s an hour's work has gotten one a smaller and smaller share of the per capita GDP. So, while GDP has risen, this has been irrelevant to the bulk of the population. Each GDP recession seems to ratchet down living standards, and each GDP expansion seems to have only a modest upside. I agree that there are a lot of dolts and losers. Most people are dolts and losers. Still, a lot of them have real grievances. You can't blame them for wanting political power. Those who currently have political power have built an outsized financial sector at the expense of just about everything else. This has been horribly expensive and wretchedly inefficient. It has rewarded many dolts, though one cannot categorize them as losers. My guess is that the UK is not quite ready for a Brexit, but I am expecting a worryingly close vote. At least I hope it makes the ruling class worry. The current scheme has created all too many losers and not enough winners.
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The minimum wage is supposed to provide more than bare subsistence. If you have a business that is predicated on your employees living with no privacy, inadequate food, no free time, no health care and so on, then you should be put out of business. The government should not be subsidizing uneconomic businesses. Lenin is dead.
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The big risk of Brexit is London's position as a financial center. For most people in Britain, like most people in the US, the recession has not yet ended. The economy is soft. Jobs are uncertain. Government services like the NHS, schools and universities are being ruthlessly squeezed as infrastructure visibly corrodes. If you look at England, the only area not sunk in a long term recession is around London. The UK has 9 out of 10 of the poorest regions in northern Europe. If you live in Leeds or Liverpool, your interests are not at all aligned with those of someone living in or around London. Even a lot of people living in or around London do not have their interests aligned with those of the ruling class in London. A 2% decline in GDP is just not something most people in England are likely to notice. Most of them are already suffering as their wages continue to fall as a percentage of GDP. This ongoing effect dwarfs the supposedly terrifying consequence of the Brexit. The only people likely to notice that 2% or even 10% are the bankers, and then only bankers above a certain high level of income. In a way, the Brexit vote is a vote on the current regime in which London acting as an international financial center has led to the neglect of the UK itself as an arena for economic development. Leaving the EU, whatever its disadvantages, would make it easier for a government to consider some policy besides slow economic starvation. People in the UK have watched Greece being slowly strangled and Spain slowly drowning. Membership in the EU makes it impossible to do the obvious to avoid that economic situation. Leaving might allow some flexibility, especially since England still has its own currency. Now, if I were an upper level executive at a large international bank, I'd be seriously against the very idea of Brexit. Financial centers are easy to move. They require no particular expertise or capital. They are the product of political decisions, not economic ones. If I were anyone else in England and not living on a fat family trust, I'd be seriously considering leaving the EU. ---- http://www.tomforth.co.uk/poorestineurope/
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From Overheard in New York 9/8/07: Splenda's Actually Sugar with Augmented Breasts and No Pubes Chick #1: I always use Equal. Chick #2: Why? Chick #1: Well, I like to think of Equal as the women's lib of sweetener. Chick #2: So... What does that make Sweet'N Low? The pre-lib? Feminine mystique? Chick #1: Yeah... Just look at it -- pink and pretty, sweet, and bowed low. C'mon. It's like, 'Hey, ladies, be sweet and pink for your man -- use Sweet'N Low and stay in shape and he'll love you more!' Then there's Equal -- it's blue, it's bold, it demands attention. It says, 'Yeah, we're an artificial sweetener, marketed towards women, but we're equal!' Chick #2: Um... Okay, so what does that make Splenda? Chick #1: I guess post-lib feminism? Chick #2: Uh, I don't even know what that is... Chick #1: Well, see, Splenda's in court now because apparently neither does anyone else. Chick #2: Wow... The history of feminism, as interpreted by Deborah, through artificial sweetener... I don't think I was ready for that at eight in the morning on a Thursday. Chick #1: Yeah... But that was the only time it was gonna happen. --71st & West End
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Fish and streams can be hard to predict. The good news in my neighborhood is that the salmon have figured out that the Elwha dams are down and have been swimming and laying eggs upriver sooner than expected. That's better news than the other way around.
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I think a lot of it was trade. If we had kept up our tariff wall, it would have been automation. One big difference is that automation tends to be incremental. Jobs are eliminated piecemeal, perhaps dozens at a time. The town may die, but for a while, individuals have time to adjust. Free trade means that the entire factory gets shut down, all at once. That is much harder for individuals and the community to adjust to. If you look at China right now, it is suffering from weak demand, but also from rising automation, and I'll use that term to include all labor saving changes such as process improvement and product redesign. It isn't just robots. It's also things like soldering in the processor rather than installing a socket and then plugging in the processor. Maybe T-Mobile is on to something giving away stock to people who buy their products. Welcome to tax hell and all that, but it is a way of aligning the labor saving incentive with the need to fund consumption. Perhaps they are right for the wrong reason.
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China has a real problem with steel production. They've been trying to close down their Mao era steel plants, but that entails a risk of political unrest. Those factories employ a lot of people and are ridiculously inefficient. Right now they are staying open thanks to subsidies. If they shut everything down, they'll have cities with hundreds of thousands unemployed. A lot of them rely on excess steel plant heat during the winter, so they'll have hundreds of thousands of hungry, freezing former steel workers, some of them fairly tough guys.
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Bill Clinton definitely understood the business of running an empire. When Secretary of Commerce went died in a plane crash in Croatia back in '96, he was on a mission boosting US business exports. Talk about Buy America. It's rare you see someone in the business world actually have some skin in the game for all the big talk we hear.
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Of course, right now the shoe seems to be on the other foot as US and European economic weakness have turned China's export centers into ghost towns. (I exaggerate, but only a bit. Bloomberg and others have reported that there are more and more economic soft spots in China which can in no way afford to consume its own production.) http://www.bloomberg.com/news/articles/2016-06-05/china-s-factory-to-the-world-is-in-a-race-to-survive
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Well said. Until we make real policy changes, we are trapped in a weak economy while those things that make us a viable society erode.
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For a long time the US had an almost unique market for imports. With a large, relatively well off middle class, it gave just about anyone in the world a place to sell goods without having to make the political changes necessary to build up demand in the home country. This worked out very well for the ruling classes around the world who could hire inexpensive labor and sell the goods so produced in the US. They could buy political peace by raising living standards slightly, but nowhere near enough to produce an internal consuming class which might demand political concessions. The US middle class has been under assault for three or four decades now, and has become smaller, less affluent and less able to serve as the buyer of last resort. This was not because of free trade, though free trade was one of the many forces at work. Others, like automation and union-busting, were more powerful, but free trade was in the package. Basically, if we had kept our tariff walls, automation would have advanced more swiftly than it did. Still, free trade, not automation played the role of the executioner. Automation tends to take a few jobs at a time. Free trade usually closes the entire factory. I can understand why so few former members of the middle class are in love with free trade. If they had lost their jobs to robots, they would be railing against machines instead of trade treaties. Thanks to the modern economic consensus, the world no longer has a reliable buyer of last resort. Ruling classes around the world can no longer raise living standards by increasing exports. Given the political and economic structures in place, this is worrying. China is already feeling the pinch as exports have fallen and more companies have automated. Their legacy industries are increasingly expensive to subsidize. Their rulers have had no choice but to crack down politically and hope they can ride out the economic downturn. China is not alone. We have trapped ourselves. None of this bodes well for the US middle class or the rising classes elsewhere.
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