Mystery Economic Theater 2018-2019

[ewmayer]

What the Headlines about Tesla, Snap, and Twitter “Earnings” Should Have Said | Wolf Street

Clearly markets need to fall a lot further than they did this week to put a dent into this kind of stupid.


Meanwhile, the apparently-widespread-in-the-UK delusions about being able to negotiate a 'soft Brexit' on special-deal terms favorable to the UK are facing an ever stiffer dose of reality - not only is the EU, in full knowledge that they have all the leverage here, unwilling to cut any special deals, but now Northern Ireland has come out and said they intend to remain in the EU customs union after Brexit.

Good discussion resulting from the above announcement on NC today.

[Fusion_power]

This post is about understanding bubbles, whether in the stock market or in a macroeconomic system. It is not in detail. It will point out examples of some bubbles from the past and suggest the logical consequences of the slow expansion then sudden decline as the bubble deflates.

Some bubbles are in the housing market i.e. 2007. Some bubbles are in the .com arena i.e. 1999. There is the current crypto-currency bubble which defies comprehension but is clearly deflating at a rapid pace. Some bubbles are in the most famous bubble maker, the stock market. When the stock market inflates a bubble, buyers push up prices until the fundamental business profit structure vs equity price is no longer aligned. Ask yourself if there is a macroeconomic bubble. Do we currently have a housing bubble? banking bubble? business sector bubble of any type? Clearly we do not. What we have is a nation swimming in debt with interest rates at the beginning of a long term period of increasing and a stock market where the profits do not align with equity prices. The stock market bubble has been punctured by interest rate reality but this is NOT a catastrophic condition. It is debilitating, but recoverable over the short term. Prices probably will rise again over the next few months with new highs in the market. There is nothing in the current market status that indicates a broad pull-back aka "bear market" is beginning.

Debt levels in the U.S. and by the U.S. Government are another story. I can't see any way to avoid decline of the dollar vs foreign currencies when viewed long term. The decline in purchasing power combined with inflation inside the U.S. economy will put incredible pressure on lower income families. These families will rely to a greater extent on public subsidies to survive. Food stamps aka SNAP will be utilized more and more over time. Other subsidy programs such as medicaid will be put under increasing pressure.

[Dr Sardonicus]

Originally Posted by ewmayer

This is by way of followup to an NFL-related article I posted yesterday in the neighboring Worldwide Nightmare Theater thread -

Another great snip in a piece full of them (snip!):

Never mind players being cattle. Recall the

October 2017 meeting of NFL bigwigs:

More than two dozen NFL representatives and players met Oct. 17 in New York to discuss the issues behind the league-wide national anthem protests, which include the mistreatment of minorities by police officers and general racial inequalities. Texans owner Bob McNair likely didn’t endear himself to the players with his reaction to the meeting.

McNair was one of the NFL’s 11 representatives at the meeting. The following day, NFL commissioner Roger Goodell convened all 32 owners and the previous day’s meeting was discussed.

“We can’t have the inmates running the prison,” McNair said to the other NFL owners one day after the meeting, according to ESPN.

Alfred Hitchcock famously compared actors to cattle (see, e.g. here). He ultimately denied having said that actors were cattle, but that they should be treated like cattle.

[ewmayer]

Elizabeth Warren Slams Democrats for Helping Gut Financial Regulations | naked capitalism

In recent years, a raft of studies have found that for developed economies, bigger financial sectors are a drag on growth. The IMF concluded in 2015 that Poland had the optimal level of banking system development. More than that could be productive only if financial firms were well regulated.

In fact, as currently configured (the weak post crisis re-regulation didn’t do enough to change this overall picture), the banking sector is extractive. We’ve regularly cited a seminal paper, The $100 Billion Dollar Question, by the Bank of England’s director of financial stability, Andrew Haldane. He compared the banking industry to the auto industry, in that both produce pollutants: for cars, exhaust fumes; for bank, systemic risk. While economists were claiming that the losses to the US government on various rescues would be $100 billion (ahem, must have left out Freddie and Fannie in that tally), they ignored the broader costs (unemployment, business failures, reduced government services, particularly at the state and municipal level). His calculation of the world wide costs:

….these losses are multiples of the static costs, lying anywhere between one and five times annual GDP. Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK. As Nobel-prize winning physicist Richard Feynman observed, to call these numbers “astronomical” would be to do astronomy a disservice: there are only hundreds of billions of stars in the galaxy. “Economical” might be a better description.

It is clear that banks would not have deep enough pockets to foot this bill. Assuming that a crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year. The total market capitalisation of the largest global banks is currently only around $1.2 trillion. Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite.

That means a banking industry that creates global crises is negative value added from a societal standpoint. It is purely extractive.

But our feckless Congresscritters are all too happy to throw pretty much everyone under the bus to curry favor with pet donors.

Killing a Parasite, Part 2 — How to Implement Student Debt Cancellation | naked capitalism

Paul Campos, writing in the New York Times, first identifies the “cover story,” the comfortable myth, that’s used to explain the booming cost of college (my emphasis throughout):

Once upon a time in America, baby boomers paid for college with the money they made from their summer jobs. Then, over the course of the next few decades, public funding for higher education was slashed. These radical cuts forced universities to raise tuition year after year, which in turn forced the millennial generation to take on crushing educational debt loads, and everyone lived unhappily ever after.

This is the story college administrators like to tell when they’re asked to explain why, over the past 35 years, college tuition at public universities has nearly quadrupled, to $9,139 in 2014 dollars. It is a fairy tale in the worst sense, in that it is not merely false, but rather almost the inverse of the truth.

He then shows that the truth is almost exactly opposite:

In fact, public investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.

In other words, far from being caused by funding cuts, the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education.

If car prices had gone up as fast as tuition over the same period, he writes, “the average new car would cost more than $80,000.”

Where is this money going? Among other places, into the pockets of the administrator class. Campos notes that “an analysis by a professor at California Polytechnic University, Pomona, found that, while the total number of full-time faculty members in the C.S.U. system grew from 11,614 to 12,019 between 1975 and 2008, the total number of administrators grew from 3,800 to 12,183 — a 221 percent increase.”

But a glaring omission: no discussion of measures needed to rein in the rampant rise in college costs which was fueled by all those decades of cheap, subsidized, risk-free-because-because-government-backed lending. The U.S. government is indeed "in a unique and powerful position" -- one in which it could cut off student loans to institutions not meeting reasonable X-persent-of-every-dollar-goes-to-actually-educating-students standards. Of course that would gore numerous sacred cows amongst the administrator-grifter and legacy-burnishing-via-huge-capital-projects classes. 'Tis a consummation devoutly to be wished.

[wombatman]

I'd be curious to see the education funding breakdown on a state-by-state basis. The only reason I mention this is I happen to know that here in SC, the University of South Carolina receives only about 8-10% of its overall funds from the state government. To be fair, I have no idea how much might come from the feds (not counting funding for research and whatnot).

That said, the cost of higher education is waaaay out of control now. The X% to education requirement is a good start, as would be a reduction of administrators.

[kladner]

Various state and local governments are enacting, or considering, taxes or surcharges which target companies with extreme differences between exec and median worker pay. Such ideas may be trickling up to the Federal level.
https://www.theguardian.com/business...what-can-we-do

The CEO of Marathon Petroleum, Gary Heminger, took home an astonishing 935 times more pay than his typical employee in 2017. In other words, one of Marathon’s gas station workers would have to toil more than nine centuries to make as much as Heminger grabbed in just one year.

Employees of at least five other US firms would have to work even longer – more than a millennium – to catch up with their top bosses. These companies include the auto parts maker Aptiv (CEO-worker pay ratio: 2,526 to 1), the temp agency Manpower (2,483 to 1), amusement park owner Six Flags (1,920 to 1), Del Monte Produce (1,465 to 1), and apparel maker VF (1,353 to 1).

In Oregon, the city of Portland has adopted what the economist Branko Milanović has labeled “the first tax that targets inequality as such”. Portland’s new levy imposes a 10% business tax surcharge on companies with top execs making over 100 times their median worker pay – and a 20% surcharge on firms with pay gaps that stretch past 250 times.

City officials in San Francisco are bringing a similar measure before voters this November. At the state level, lawmakers in Minnesota, Rhode Island, Connecticut, Illinois, and Massachusetts are getting into the pay-ratio tax act as well.

[ewmayer]

Counterpunch has launched a new weekly series, The Hudson Report, featuring interviews with and commentary by famed economist/historian Michael Hudson, who regularly appears (both in articles and as a voice in reader comments) on Naked Capitalism. Here is the inaugural installment:

Modern-Day Debtors’ Prisons and Debt in Antiquity

A new ACLU report just got released called A Pound of Flesh: The Criminalization of Private Debt, that shows that thousands of debtors are arrested in jail each year in the U.S. because they owe money–and millions more are threatened with jail. The debts can be as small as a few dollars and can involve every kind of consumer debt from medical bills to car payments to student loans to credit card debt.

It goes sort of something like this… cities and private collections agencies have teamed up to bring back a system of modern day debtors’ prisons to skirt around federal law that has prohibited debtors’ prisons since 1833. And it’s also in clear violation of the Equal Protection Clause of the 14th Amendment. And these agencies and their hired lawyers will send out a notice to someone who’s missed a payment. That person won’t show up to court. They get a notice of contempt and then it goes on their record and an arrest warrant is issued for their failure to appear in court. And this takes some pretty big cooperation or coordination with the prosecutors and the judge. One of the most alarming things is that there’s sort of a business relationship or a quid pro quo between collection agencies and the prosecutors.

Hudson has some interesting commentary on the historical usages of the word "tyrant" ... fast-forwarding to the present day, I was gobsmacked by the perverse way the US government's Bureau of Economic Analysis, which publishes the official US GDP statistics, factors credit card usury interest and penalties into their GDP numbers:

... if you’re in classical studies–Greek and Rome–you read about debt. It’s only when you get into the modern era you stop reading about debt… and the economic models that are taught in the schools leave debt out of account. It’s as if the whole economy works on barter, not only without money, but without debt relationships. These simply are not built into the models and they’re not even built into the statistics.

For instance, I was recently down in Washington where I’m heading a group at Democracy Collaborative to look at the Gross Domestic Product accounts. We’re trying to figure out how much of GDP–Gross Domestic Product–is absorbed by interest. And surprisingly, even though debt is going up and up and up, we didn’t find the interest or debt service rising. So we called up the Bureau of Economic Analysis that publishes the GDP statistics. I asked what happens when the credit card companies make more money on penalties than they make in interest. When you miss a payment on your debt (this is before you go to prison) and you can’t pay the electric bill or a credit card bill, your rate goes up from 11 percent to 29 percent.

The answer they gave us was: “That’s not interest. We count that as a financial service, and financial services are an addition to GDP.” So all the added penalties that people pay for falling behind in their debts for arrears are counted as a growth in GDP – as economic growth!

``

[ewmayer]

Then They Came for the Globalists | C.J. Hopkins, Counterpunch

Thank God for the corporate media. If it wasn’t for them, and the ADL, I’d have probably never discovered that I’m a Nazi. Apparently, I’ve been one for quite some time … which is weird, as I had no idea. Here I was, naively believing that I’d been writing about global capitalism and the realignment of political power and ideology in the post-Cold War world, when all along I had really just been persecuting the Jews. I didn’t think I was persecuting the Jews. But such is the insidious nature of thoughtcrime. When you’re a Nazi thought criminal (as I apparently am), it doesn’t matter what you think you’re thinking. What matters is what the global capitalist ruling classes tell you you’re thinking, which it turns out is often a lot more complicated and horrible than what you thought you were thinking.

For example, I’ve been thinking and writing about globalism, which most dictionaries define as “a national policy of treating the whole world as a proper sphere for political influence,” or “the development of socioeconomic networks that transcend national boundaries,” or something like that … which was more or less my understanding of the term. Little did I know that these fake “definitions” had been infiltrated into these dictionaries by discord-sowing Strasserist agents to dupe political satirists like myself into unknowingly spreading anti-Semitism as part of Putin’s Master Plan to destroy the United States of America and establish worldwide Nazi domination.

Fortunately, the lexicography experts in the corporate media and the Anti-Defamation League cleared that up for me earlier this month. According to these experts, words like “globalist” and “globalism” don’t really mean anything. They are simply Nazi code words for “the Jews.” There is actually no such thing as “globalism,” or “global capitalism,” or “transnational capitalism,” or “supranational quasi-governmental entities” like the International Monetary Fund, the World Trade Organization, the European Commission, and the European Central Bank … or, OK, sure, there are such entities, but there is no legitimate reason to discuss them, or write about them, or even casually mention them, and anyone who does is definitely a Nazi.

[wombatman]

Originally Posted by ewmayer

Then They Came for the Globalists | C.J. Hopkins, Counterpunch

Not for nothing, but here's a video of a former white supremacist mentioning how the term "global Zionist conspiracy" did become "globalist" as part of a larger effort to mainstream neo-nazism.

This is not to imply that any person using "globalist" is a nazi or to deny that people/groups may willfully apply the term in a specious way to derail an argument they're losing, but it's important to note that it is very much a coded term used by modern nazi groups.

[ewmayer]

In "the rule of law is indeed dead and buried" news:

Third Circuit rules for Uber in antitrust suit. States that even if Uber established its dominance through violating state regulations, that doesn't violate antitrust laws; in fact, it increased competition https://t.co/ITOB5l3sea pic.twitter.com/f7hsiuTu6u

— Lina Khan (@linamkhan) March 28, 2018

NC reader 'allan' comments:

So, illegal actions to destroy your legal competitors are not anti-competitive. OK.
All three judges on the panel are Democratic appointees (two by Clinton and one by Obama), including Ed Rendell’s ex-wife. Just makes you want to pound the pavement and GOTV, doesn’t it?

[Dr Sardonicus]

Originally Posted by ewmayer

In "the rule of law is indeed dead and buried" news:


NC reader 'allan' comments:

It might be prudent to read the initial (non-precedential) ruling before commenting on the later ruling (I replaced the tinyURL with the proper URL). The initial ruling is much more brief and to the point. The following explains the legal situation (my emphasis)

We need not consider whether state statute grants a private cause of action for enforcement of taxi licensing regulations, because Count One - the only Claim raised on appeal - was based solely on the Pennsylvania state law of unfair competition, not on any statutory private right of action. Whatever the breadth of unfair competition in Pennsylvania, state law clearly does not contemplate that violation of licensing regulations constitutes “unfair competition.” Thus, the District Court properly dismissed Checker’s unfair competition claim.

In other words,

(1) Checker et al failed to use an applicable statute as a basis for their appeal, and

(2) The statute they did use, doesn't support their argument.

A badly-written brief is a badly-written brief. It's not the Court's place to correct an appellant's poor argumentation or (as Checker wanted them to do, see Page 5 of the initial ruling) essentially rewrite the law. Perhaps Checker et al should sue their lawyers for ineffective representation.

As to PA unfair competition law not covering violations of licensing regulations: Even if, as popularized by Mr. Bumble in Dickens's 1838 classic Oliver Twist, "the law is a ass - a idiot," it is still the law.