I did not start blogging in order to start a media career, but sometimes the media finds its way to my door.? I received a call today from a reporter for one of the major television networks, and after talking a while, she asked me, “What big stories aren’t being told?? Some of my best stories some from asking this question.”? I told her I needed to think, and would e-mail her back on the topic.? I decided I would review my last month of posts to look for out-of-consensus ideas, and I came up with these:
- China is overstimulating businesses through loans and they are buying up commodities that they don’t need now, leading to a possible correction in commodity prices.
- Western European banks are in trouble because of loans to Eastern European nations denominated in Euros.? With the rise in the Euro, defaults are likely.
- Water shortages in China and India.
- Most entities that the US Government has bailed out will have stocks that are zero eventually — GM, Chrysler, AIG, and maybe Fannie Mae and Freddie Mac.? For an opposing opinion on the GSEs, read the intelligent John Hempton at Bronte Capital.
- With dud residential mortgage loans, modifications don’t work well unless there is a forgiveness of some of the principal.
- The foreign funding base of the US is getting shorter in maturity — could this be a sign of trouble?? Is there a lack of confidence?
- If we marked the value of commercial real estate loans to market for banks, using data from the CMBS market, some banks would be insolvent.
That’s all for me, or now.? Now, I don’t watch television, listen to radio much, and I don’t subscribe to anything aside from the WSJ.? I don’t see everything.? That is why I am asking my clever readers to answer the question that the reporter asked me — what significant economic stories aren’t being told?? These can be small issues as well as big issues.? Please let me know in the comments below.? Thanks.
For me, the big untold story is US consumer spending, and consumer deleveraging. This seems to be the dog that did not bark in the night. Given that savings rates have soared, and presumably there is a lot of debt to be repaid, why is consumer spending so robust, or why is it not collapsing? Is this being kept afloat by government spending that must eventually disappear, or are consumers just deluding themselves, and carrying on as though it’s still 2006?
Power generation in Europe may be an idea. I live in Poland, but it refers to most Western European countries as well. Most power plants are old and there are virtually no plans (nor money) to replace them. It is probable that we will have an energy crisis around 2012 – it’s already too late to do something about it (and no-one it trying).
That’s one of the results of having elections every 4 years or so, and having a state-controlled power generation system. No government wants to incur the costs.
First, what a great question the journalist asked you. Too bad more of them aren’t asking those sorts of questions.
Your point about the need for some forgiveness of principal on mortgage loans is one that John Hussman has been hammering since last year. His innovative solution (of offering loan owners “property appreciation rights” in exchange for writing down some of the principal) is an idea that doesn’t seem to have gotten much traction in policy circles.
Another, smaller economic story that hasn’t been told is that so called extreme job hunting tactics are more successful in giving mainstream journalists story ideas than they are in getting the job hunters the jobs they seek. A WSJ recently missed this point in her article about a few extreme job hunters. I blogged about this a few days ago.
Well, I think the elephant in the room is the Fed’s QE. It helps the banks, and that helps the stock market (for now, so the mainstream acts like it’s not an issue. I think it’s an outrage.
A couple of things come to mind, in no particular order:
1) Foreclosures are losing their depressive area effect on prices. I haven’t seen a story – this is just my sense of what is going on. People have figured out that foreclosures are happening all of the country, so their presence isn’t stigmatizing neighborhoods any more. And people have figured out that distressed sales may be unusual bargains, or they may not be bargains at all if the house is in really bad condition, so those factors are now getting discounted appropriately in evaluating overall residential real estate.
2) Bloomberg has interesting stories on the link between the Lehman collapse and commercial paper via runs on money markets: http://www.bloomberg.com/apps/news?pid=20601109&sid=aLhi.S5xkemY
http://www.bloomberg.com/apps/news?pid=20601109&sid=aNFuVRL73wJc For me at least, it gives a different perspective than the common line at the time that banks were afraid to lend to each other.
3) Lack of job growth means U.S. economy already had a “lost decade” – http://www.nytimes.com/2009/08/08/business/economy/08charts.html
http://www.mybudget360.com/employment-situation-job-anti-growth-a-decade-with-zero-net-added-jobs-131-million-nonfarm-payroll-employment-in-june-of-2000-131-million-nonfarm-payroll-employment-in-june-of-2009-646000/
4) The media aided and abetted the housing bust – Again no link, because this is just my perspective. I recall hundreds of articles earlier in this decade that purported to give good advice about home ownership in the form of completely wrong analyses of the cost of ownership vs. renting (missing all sorts of costs on the ownership side and basically figuring on zero investment return with the money no tied to the house). There were all sorts of “calculators” all over the web that did the same. I haven’t come across a single medial story remarking on that phenomena since the housing bust.
5) Missing the idea that an overall just balanced Federal budget rationally implies running a surplus when the economy is good and a deficit when it is bad – Calculated Risk has an editorial elaborating on this point (“A common on the Deficit and National Debt): http://www.calculatedriskblog.com/
CR doesn’t mention how this idea probably goes double for state budgets.
6) Not enough coverage of the debate on the cause of low natural gas prices and how long it will last – e.g. what is the relative importance of a) weak economy, b) lagging excess production due to decisions made in previous regime of high prices, c) new discoveries produced by improved drilling tech, d) efficiency improvements by natural gas consumers. The low prices themselves could also help consumer bills a lot over the next year (I live in MN and normally spend a lot more on nat gas for heat and the gas input to electricity generation than for gasoline for transportation).
7) The healthcare “debate” is destructive in part because the media coverage of “cost rationing” within potential govt. sponsored coverages is so one-sided to the negative. I believe huge majorities of the country would be in favor of *intelligent* cost rationing within those policies that provide a social safety net (as opposed to the media highlighted examples of ad hoc loophole profiteering within employer purchased group coverage) if they really understood the issues.
Excellent stuff, so far. Thanks to all who have shared their thoughts.
David,
First, I think the item second on your list is very insightful. I hear “weak dollar” ad nauseum. I never hear about the impact of a rising euro. Very good.
Second, I see a few tangential stories that don’t get mainstream press.
1. Why the recent rise of gold to $1,000. Lots of coverage of the bump, but little specualtion as to the cause. Specifically absent is any discussion of geopolitical events (renewed calls for repositioning in Afghanistan and the 9/15 deadline for Iran).
2. The growth of “hedge fund” strategies among mutual funds. What impact will the rise in short sellers mean for efficiency, returns, volatility, etc?
3. The austerity policies of the IMF and their impact on global economies. Lately, developing nations are pushing back against the IMF advice. What will the impact be on global growth?
The healthy bond auctions of late are the tell-tale signs that something is amiss. Investors don’t run to bonds and gold when “the market is rising and offering such great value!” Reporters need to dig into it deeper to shine some light on it and the investing public. Who’s buying? Somehow I feel that “they” would have to kill you if they told you.
When I was young I lived in communist East Germany I witnessed the disconnect between ideology and reality. Living in the US now I see a similar disconnect, just in the ideological opposite direction. One example is ownership: in theory people think they “own” a house, or they “own” stock. But in practice many rent seekers are squeezed in between an “owner” and his “property”: paying the mortgage, paying property taxes, paying the realtor 6 percent every 5 years, paying the home ownership association, paying Mello Roos. Or in case of stocks, paying the fund of funds, paying the fund, paying the bonuses of the managers of the company etc.
A rent extractor society.
“Who’s buying?”
I think big banks are buying. Also sovereign wealth funds as they swap out of Agencies. Finally, the Fed themselves are buying.
At this point I think we are in the Japan scenario. Vicious stock market rallies against a back-drop of economic malaise. If we are very unlucky, a failed bond auction and the whole thing spirals out of control. The thing is, I don’t know what would precipitate a failed bond auction. The Treasury and the bond buyers are co-dependents.
Are municipalities ignoring property tax delinquencies the same way banks are kicking mortgage delinquencies down the road ? My limited observations indicate they are. How big is delinquent tax hole? This is real debt, and the municipalities have first call on proceeds from sale or foreclosure. In some areas, tax payments can be a substantial fraction of mortgage payments.
Is this being factored in the numbers on how deeply mortgages are under water ?
IMF says 4 trillion in writedowns but aren’t there a few trillion (seen estimates up to 5t) still off-balance sheet with the major banks?
By the time FASB implements mark to market banks that have marked like Goldie may ‘write-up’…perhaps why Whitney still has Goldie as a buy.
Real time daily income tax deposits much better measure of employment.
Discrepancy between ADP small business growth and BLS birth/death adjustments results in 4 million jobs
After G2 did China and the US agree to withdraw liquidity to cool the bubbbles?
The declining standard of living in the US is being masked by the declining value of the dollar. Jobs have been syphoned off for so long, but cheap credit kept the party going for the past decade. Until our living standard is slashed considerably more, we’ll continue to lose jobs to low wage countries.
Also, what will the world be like when a communist country is the economic leader? I think we’re headed towards more dictatorships and the hope for democracy is waining. China doesn’t care what countries do to their people. At least we cared…sometimes. Alliances will fade as countries act in their own best interests to satisfy the new 800 lb gorilla in the room. We’ll turn into a France…a former power that luckily has nukes.
1)The record disparity in wealth in this country will have social policy and therefore market consequences. 70% of GDP is consumer – government can’t continue to substitute for consumers here.
2)Media continues to look at relationship of debt to GDP, without focusing on GDP in relation to available quality energy (in particular oil). With the amount of social inequity and debt we have we might have been able to have growth in future with global oil exportables where they were 50-60 years ago. Not now. And we have even become more dependent on oil based transport in the meantime.
3)the systemic risk of tertiary (marker) assets compared to real capital. (All financial assets will eventually become more correlated)
4)the coming failure of networked systems. Just as markets price at marginal unit and misprice long term scarcity, increased complexity in global trade/delivery systems will increase risk of dislocations. E.g. chinese starting to view rare earth metals as national asset, but West needs these to develop renewable tech.
As a former broadcast news vet (14 yrs, small market) there are a number of stories being missed, mostly because the reporter is under a deadline and is encouraged to come up with a story, rather than ask “why”.
Why aren’t the government figures reflecting what people are experiencing? (unemployment, inflation). I speak to people all the time and all the green shoots we see tend to be pond scum
Why are we ignoring the overall increase in federal deficits and talking instead about “cutting the deficit in half” by referring to the yearly deficit increase?
Why is the Fed, and not Congress, making decisions about our money and who gets bailed out next with a financial giveaway program? (we don’t elect the Fed, we do elect Congress)
Why are we not asking about the health of banks if the stress test only anticipated 8-9% unemployment this year, not 9-10%?
News reporters are continually feeding at the government news buffett, without asking the hard questions or even looking past the talking points. A good reporter puts the subject on the spot by asking the questions the average person on the street wants to know. A Great reporter actually builds a story around the truth.
Hello David,
I think the great untold story is the shift in the US society that is occurring towards a classic banana republic psyche. I think the average educated person in the country, at least those I converse with, realizes that the fix is in regarding markets and the economy. They understand that the government, in cahoots with the Fed, are performing the grandest experiment in the history of the world…and that it is likely to fail.
This is creating a risk aversion/deflation psyche which the deflationists like Mish and other graps onto – along with the obvious indebtedness etc. However, in my mind rapid inflation is also a risk aversion as it moves to the extreme. People begin to move assets into “things” for fear of a devaluing currency. In its purest for, i.e. hyperinflation, this is done mostly out of risk aversion rather than greed or risk appetite.
I think the current move in markets on a global basis, is largely about this emerging shift in risk aversion manifesting itself in a mass migration into “things”. This is a necessary stage in the process I expect to be the greatest of all bubbles popping – the global fiat/central bank monetary system. I think we are still relatively early in this process, but I think it will dominate asset and currency market in the coming years. It is fascinating to witness its genesis in its early stages.
Locksmith,
“The record disparity in wealth in this country will have social policy and therefore market consequences.”
If anything, I think the disparity in wealth (and incomes) has been narrowing during this recession. That’s usually the case, but it seems even more pronounced this time.
Banking/Finance reform and regulation is MIA.
David,
While insider buying/selling figures have been reported on numerous occasions, and currently stands at 95% sell/5% buy, little has been written analyzing these numbers. Given the huge disparity on the sell side this screams for some in-depth discussions.
Hi David.
I think there are many things the media is missing, but in my mind there are perhaps 3 big ones.
1) The changing demographic picture in the US and all of the western developed world, and how the destruction of the housing model in particular may dramatically alter both thoughts about retirement and vastly reduce expected standards of living. It may also alter the way housing is priced going forward for the foreseeable future.
2) The idea of freedom is a concept grounded in a mans God given rights articulated in the constitution. Which means freedom from government to pursue their own ends and bare the weight of failure, or the glory of success as their own. This is missing from the current discussions in many places.
3) and by extension, that many citizens have traded their freedom for the appearance of wealth and progress. A heavily indebted citizen is not a free man but a serf to the institutions that hold his various loans. This type of servitude is antithetical to the great American traditions of freedom, but all anyone is offered is more government and more enslavement to the debt they already have.
tw
The cancerous infestation of self-serving Wall Street crooks in the Federal Government. They have deliberately ruined this country and have gotten away with it scot-free.
We know that insiders are selling but no one is telling us who is buying.
Is it possible that this is all Chinese investment?
One topic that may be interesting and eye-opening to the segment of the US population that is not professionaly engaged in financial markets and investments is the relationship between pension funds (particularly those of municipalities) and private equity and hedge funds. The fund allocation process is frought with conflicts and the comp structure for the funds(e.g. 2/20) and placement agents (e.g. 2% of capital raised) creates a situation where fund managers often become enormously wealthy even with miserable performance. I believe some of the largest firms have lost hundreds of billions of dollars (particularly if you included debt in addition to equity), most of which is money indirectly contributed by civil servants who don’t even know they’ve lost their safety net. Layer in FAS 157 and the discretion investment managers have to mark assets to market, and I think you have a real bad situation.
The growth in government debt is a real killer.
Observe the interst paid in the current
budget,this will grow significantly
Another story that hasn’t been told (except by me and a handful of others) is the game-changing news announced this week by one of the companies I mentioned in the comment thread of this Aleph Blog post last week, Tickers for the latest portfolio reshaping. That’s big news for a small company, but it also has larger implications for the global economy. It suggests that the Aussie mining industry believes that the Chinese economy still has legs, and it lends tentative support to James Kynge’s “China Continental” thesis.
Big story for me relates to potential outcomes of a congressional audit of FED. Donald Kohn warns of possible credit issues re balance sheet yet everyone’s merely speculating as to what the wizard is doing behind the curtain. Congress is my least favorite branch of gov’t but the FED has to be held accountable by someone
The utterly irrealistic future performance assumptions from pension funds and financial advisors. It flies in the face of deleveraging reality, but the fallacy is still alive because the job of so many finance professional is dependent on it. It has two impacts :
a) It underestimates the value of pension liabilities for the companies that are pension funds sponsors. Conversely, it leads people to overstimates the amounts that will be available for retirement.
b) It forces investors to over-invest into “risk assets” because these are the only way to achieve such lofty investment goals : look no further for the cause of the recent rally in stocks.
Great post and a lot of good suggestions.
Here is my ideas:
– Japan reaching the slippery slope of debt to GDP, declining GDP and demographic problems
– Eastern Europe and its impact on the banks in Europe
– The slow train crash of commercial property
– the Spanish economy and the impact of 20% unemployment and uncertianty around the health of the whole banking system with limited transparency
– the dreadful shipping market, especially for container ships not even covering operating costs at the current spot charter rates and more ships being delivered daily
Here are a couple of ideas:
– Is China becoming less recession-proof? The flip side of government-mandated credit expansion over the past year in China is the high likelihood that many of these loans will go bad in future years. And remember that bank credit in China is high relative to its GDP. Given the roots of the current global credit crisis, I think it’s fascinating that many people outside China are cheering its stimulus policies, while averting their eyes to the fact that China seems to be creating the same sorts of credit excesses that the rest of us are now suffering from. The bottom line is that a Chinese recession — ie. an actual decline in its real GDP — looks increasingly probable in coming years.
– Are exchange and capital controls coming to America? Much has been written about the rising risks of trade protectionism because of this crisis. But given the financial dynamics — eg. persistent global current account imbalances, more volatile cross-border capital flows, and a weak dollar — would it be too surprising if the U.S. government at some point imposed foreign exchange controls on its citizens and capital controls affecting U.S. residents and non-residents? It’s happened before since WWI; why shouldn’t it happen in the good ole USA?
december gold calls
Banks have been suitably criticized for their role in the crisis, but the role of the institutional investor has not been laid bare.
The toxic debt created by the banks was sold to institutional fixed income managers around the world: insurance companies, asset managers, hedge funds, official institutions, etc. Where was their due diligence in buying this junk? Most of these investors are paid fees by pensions funds, endowments, etc – where was their professional expertise in building portfolios loaded with this stuff?
At many of these same companies, their equity departments were complicit in bidding up bank and investment banking stocks to 3+ times book value. The leverage ratios of these banks were known and so were their compensation ratios. These are not things we have learned after the fact; these stats have been in the public domain all along. Yet the institutional investor remained invested, did not protest, and was not activist as the banks were growing. Quite the opposite.
MSM and the blogoshpere needs to tell the story of the failure of the institutional investor in this crisis. It’s an ugly story.
Water is critical for life and for a fully functional society. Water shortages are manifesting themselves in countries around the world including the US, India and China. In the US our water infrastructure is near or past its engineering life in many areas including much of the east coast. Billions are required to just keep up with the repairs in this country alone, and we are not even considering replacement and system upgrades in many areas because of financial constraints. Without clean fresh water our society doesn’t function and we are ingnoring the problem because the majority of the system can’t be seen and is not well understood except by a select few, and those select few are extremely worried.
This is an almost endless quest, nevertheless a worthwhile one!
Here are some suggestions:
The current market rebound masks some serious underlying disconnects, which most would rather avoid discussing.
1.Shifting production to developing countries has created a near permanent loss of “ordinary jobs” and the knowledge-based economy will require a smaller and far better educated workforce in the West. Yet education quality has actually deteriorated here in the UK over the past 20 years and arguably in other advanced countries- look at the growth of the “undeclass”. Thus joblessness is a continuing trend, not just associated with a current economic conditions. Governments have not faced up to this, nor its consequences for welfare, health and public finances.
2. Western Governments will not be able to afford the sort of social safety nets seen in many European countries-mostly a product of post WWII reconstruction. This demands a total rethink .
3. The great climate change saga is mostly about energy, its availability, cost and use and (probable)impending shortages add to that water and food and you have a recipe for serious political unrest even major conflict. Little or no forward planning is evident.
3. Overpopulation, a forecast increae from 6 to 9bn – the demand for water. food and natural resources will push prices up and/or create shortages for significant numbers of people. Serious ecological damage is evident already and the inter-relationships are still poorly understood. It is unsustainable.
4. The distortions produced by a global finance industry, without any form of global regulation/standards/enforcement will not be curbed. The same could be argued about many other “destructive” industries, timber, mining, energy etc. Current assumptions about “business as usual” are simply wrong. Energy companies no longer have Production agreements with weak host Governments for example but are forced to operate under consultancy deals.
5.Economics as a credible science, whether for forecasting or as a statistical basis for decison-taking is dead in the water
6. We have taken free market orthodoxy for granted, at least since Adam Smith: this is unsusutainable given the complex interlocking sets of problems which demand suprantional solutions. Yet who is willing to compromise on soverignty
7. Multi-culturalism. Frequently touted as a necessary desirable means of gluing together the national social fabric is a myth. Human beings self-organise in “tribal” ways and this threatens the notion of nation states. Few are prepared to admit it or face up to the social consequences.
8. The end of US $ hegemony and the likely end of the current system of fiat money. Only a global system – a real “bancor” admisnitered by an IMF or smilar can tackle any future meltdowns – the costs of reflation are just too great for any one country. Let’s admit it.
The coming generational conflict as retirees demand what’s “due” them versus the ability and willingness of workers to support them. Will the greed of the large, politically active retiring generation create a virtual slave nation for our youth, or will they take responsibility to live a retirement lifestyle the working generation can afford.
Several months ago it seemed that the E Euro countries were headed for problems but they’re gone up. The 2nd point here “Western European banks are in trouble because of loans to Eastern European nations denominated in Euros. With the rise in the Euro, defaults are likely.” How much downside is there for the E Euro markets? More than for the US?
A few observations in no particular order:
-If interest rates are at all time lows, wouldn’t it make sense to be financing your deficits with long term, cheap debt? Why isn’t the treasury pursuing this? Would anyone want to own the bonds of subprime nation?
– If you could invest in a company that has a deficit net worth of $11 trillion, has projected 2009 earnings of negative $1.4T, projections that show over the next 10 years the company will lose another $9T in total (nearly doubling the negative net worth) and off balance sheet obligations of $40T (via the GSE’s Fannie/Freddie/etc); would you?
-How would you feel if your fate was in the hands of a communist country that would just as soon see your economy replaced with theirs as the global standard?
-There has been no significant pullback at all since the 50% rise in the market, will the little guy, or anyone for that matter, wait around to see how far it drops the next time we’re down 10% (I won’t!)? How far and fast will this thing fall on that fateful day?
-When will Goldman Sachs and their ilk be required to repay the gov’t subsidies they graciously accepted via the AIG bailout?
I’m not sure the future of this great country is so bright, sad to say.
I’ve been watching the following phenomena develop since 2003 and don’t recall anyone in the mainstream report on it.
The American Existential Narcissist. How it permeates finance, politics, education, and all our social institutions, and what it portends for the future of society in the area of domestic and international political policy, tax and fiscal policy, and the social fabric of nations.
Hi David
I am in Italy but I lived in California and NY
the media are missing the main social trends tha explains the financial crisis, the “inexplicable” level of unemployment, the sense of depression, the anger rising of the white middle calls and also the looming fiscal disaster
1) in the S&P crisi 3.600 managers ended up in jail, now nobody among the NY banks, listen to William Black for instance, there was corruption and in general the ethical standard of the financial, political and media US elite is now much worse than 20-30 years ago, they lie and and lie and the media and academia are more conformist, read Martin Armstrong from jail on GS
2) the USA is becoming more similar to Brasil or S. America as a society, just look at California, importing poverty and pushing out the middle class and ending up bankrupt, just at schools that look like prisons, look at Detroit median home price 12k$, I lived in Brooklyn…. Much of excess debt is due to “diversity”, read Steve Sailer, homogeneous countries save more and do not go so much into debt, when america was 90% european (ancestry) and with a anglo-saxon elite was a manifacturing power with savings and higher ethical standards (I know… it is a taboo, but I am in Italy so I can afford to say it). Start thinking USA/Brazil, a corrupt elite and a large underclass instead of an ethical elite and a large middle class that was America
3) the US elite of today does NOT identify with the majority of the american people, they are the “fly-over-country”) unlike the german or japanese or chinese elite, that is why has gone 100% for globalization, immigration, delocalitazion and a financial economy based on debt, mortgages, cheap money and the destruction of the manifacturing base
This may be the most depressing article and list of comments that I have ever seen.
Apparently there are no positive themes overlooked by the media.
What should we do? Sell all stocks — for sure. Move to another country? I guess. Is anyplace safe? Probably not, since they all have the same problems. Buy gold?
just wondering….
Dear Jeff, though I am not an optimist here, I have noted that as well — but people are negative here, more so than I am. It makes me a little more bullish.
Wow! terrific! – the thoughts created by the question, and 38 intelligent comments, with not a single idiot comment among them. I loved Giovanni – so original, and a veritable ring to it. Maybe because I’m foreign born also, but a Texas resident for 34 years.
I’m a two-fingered typist, and it’s late; so I will not develop my arguments. I’m mostly focused on the long-term. I agree that economic growth prospects in the US are dismal. Non neo-classical economic schools of thought are being ignored.
Marx: the crisis in capitalism is here. we have run out of consumers because workers are not receiving their ‘fair share’ of production. So they no longer have the means to consume the production of the economic system, and they can’t borrow to do it, because they have borrowed too much already, and are a poor credit risk. There won’t be a social revolution – we’re too meek – but profit margins continue to fall, and foreign opportunities to increase profits are gone.
Me: a 10,000 year history, accelerated in the last 250 years, of technological innovation, does not prove it must continue. Most technological innovations lower the human effort needed to produce things. So we can all consume more with less work. Add population growth and savings for investment in the new technology (as well as to replace the old depreciated capital), and you get economic growth (an increase in GDP), and economic development – an increase in per capita consumption and wealth. Necessity is NOT the mother of invention. Most great innovations take 30+ years to diffuse through a society – think computers? nuclear power? the internal combustion engine. Do you see anything invented 30-50 years ago that will radically increase our productivity or change the way we live?
Which leads to neo-Malthusian thought or entropy economics. Neo-classical economics assumes supply will always respond to price. It does not allow for real supply constraints, that production depletes natural resources, and you cannot recycle energy. It assumes that all production is beneficial. It ignores that production includes the output of waste. Entropy economics owes most to Georgescu-Roegen in the 1960’s and 1970’s, who didn’t even think about carbon dioxide. Energy history has been one of cheaper energies replacing more expensive energy forms. Oil’s liquid form was also highly desirable. There is plenty of alternative energy to oil, but none of it will be cheaper, and the longer we wait to build coal gasification plants, nuclear power plants etc. the more expensive they become. The problem with waste is not aesthetic. Waste lowers the productivity of our natural and human resources. My worry about carbon dioxide (and methane) is not what it does to temperatures, but what it does to rainfall in the great agricultural regions. Incidentally, we will not stop global warming, and probably won’t even slow it down. Positive feedbacks make its implications scary, but I’ll be dead, and my kids have dual citizenship.
The demographic implications of malthus are the opposite of his concern. World population growth will stop mid-century. The population of whites in many white countries is already declining. The aging of populations in developed societies is not included in mainstream neoclassical macro-economic models. But just look at Japan to see what it does to an economy. Ever noticed how similar we are to Japan in the 1990’s? What, we don’t have zombie banks? Who are you kidding? They have $800 billion of reserves at the Federal Reserve, an excess of more than $700 million? Just like the 1930’s. And, the private sector is deleveraging. But the government is borrowing. Soon they will be at Japanese debt to GDP ratios. I haven’t checked world GDP per capita ratios lately but are we richer than the japanese? who cares, I don’t want the Japanese standard of level, and not their stock market returns either.
It’s after midnight – you people have most of the rest. It’s a debt bubble that is the problem, on top of declining global resources, global pollution, aging populations in developed countries, politicians with no self-awareness or brains, rent a stock investment mentalities so that management can steal from stock-holders with impunity, and nobody minding the store in all senses of the phrase – entrepreneurs, politicians, shareholders,citizens.
China – won’t save us. neo-Malthusian limitations- the more they grow, the more pressure they put on resource depletion and on environmental quality, the more that prices rise and klll their economic growth, especially in the face of declining exports to poor old us.
The wine is doing a lot of the writing at this time. Hope someone reads this, especially you Giovanni. Love Italy.
Of course the economy doesn’t matter too much to speculating. The stock market doesn’t react predictably to economic news. Just don’t buy and hold, unless it’s TIPs. they protect you against deflation too, you realize?
Jeff:
I have a positive. If Iraq would develop the production of its supposed oil reserves, they could pump 10 million barrels a day for a while, and make oil prices plummet. No question that that would benefit the Western economies greatly, for a while. But that, like cash for clunkers, would only delay the inevitable.
Another positive – I’m usually wrong. Unfortunately, mostly in my timing. Did make money in 2008 BTW. And I have a PhD, and retired at 54 by trading, but what idiot doesn’t/didn’t. I have a major advantage over many people (unlike Geithner), I don’t take myself too seriously.
If you can afford it now, visit Antarctica – meet your planet. We are the planet – air, water, and dirt. Look at yourself, you’re beautiful, and 4 billion years old, and the human artifice of the Western economic system doesn’t really matter, unless it gets you the money to see Antarctica, or buy wine.
Not in order of importance, but (1) is.
1) Stupid Politicians
2) China’s fake recovery
3) Global Demographic Crisis
4) Persistence of “It’s what we deserve” culture
5) Inflation, Deficits, Endless Deficits
6) America’s struggle to retain control of the world’s oceans and the rise of other powers to reclaim these oceans
7) Stupid Politicians
8) Blaming the “Free market”
9) Public’s Ignorance
10) Global Climate Change
11) Nuclear Weapons
12) Terrorism and failure to self-reflect on what caused it
13) Energy Crisis
14) Big government and growing
15) Geo-politics
16) Stupid Politicians
Bank issues will cripple central europe first, then infrastructure. So many of the “low cost” projects I’ve pursued are flickering already. Devaluation of the dollar will blow the candles out. 1st to crack….Poland has my money.
As I get older, reporting seems more and more like the blather of the twenty somethings newspapers hire, who ( it goes with the territory) are more concerned about social networking than earth shaking issues. The biggest story that is not reported is technology, which has been redefined by the media to include computer gizmos and a smattering of biotech. We need more reporting on water technology, energy technology, materials, transportation, agricultural technology, and all the other things that are really needed to keep the society running. This has everything to do with the difference between wealth and money Twitter and Face book do not cut it. A new water purification technology would on the other hand make a difference in the wealth of nations. Lack of reporting is part of what has allowed the elite to run their corporations as Ponzi schemes instead of businesses
The trade war that the usa can not win has started with china…tyres of all things kicks it off.
In response to the poster above who compared Brazil invidiously to the U.S., it’s worth noting that although Brazil has its share of social issues, it also:
– Is energy independent, thanks partly to an innovative alternative energy program launched decades ago.
– Is more pragmatic about natural resources production. Who in Brazil is arguing that the country shouldn’t drill its huge new find offshore?
– Is more fiscally responsible than us now, posting primary budget surpluses (at least until the recession hit).
– Runs a trade surplus as well.
– Has been growing its economy faster with far less leverage than we’ve been using.
Misrepresenting what you sell is FRAUD. WHERE ARE ALL the indictments?
Bags of trash with triple A ratings? That’s fraud.
Expensive, whwite collar fraud that resulted in common folk losing their life savings…
Where are all the indictments??????
Good article and lots of good comments. My observation is we started with problem mortgages, exposed a lot of deficiencies in the financial system (especially unregulated credit default swaps), and essentially switched from a capitalist system to a semi-socialist government controlled system. Lately, I see all the pundits patting each other on the back telling us we have “saved” the system. With trillion dollar deficits and 10% unemployment, the average person says Huh, what system did we save?
Seems everything is a symptom of the demographic/human capital bubble.
Low birthrate among the most educated/educable means that future workers will not be as productive. Too few skilled/productive people trying to hold it all together. The system could be overwhelmed by a disproportionate number of social service consumers. The taxes on the public generate less revenue than the cost of their social services when too many people are low skilled/low wage yet legally entitled to services provided by highly compensated professionals.
“Low birthrate among the most educated/educable means that future workers will not be as productive.”
Here’s a solution, that I haven’t heard anyone on the left or right propose: Get rid of the $1k child tax credit, and instead lower the parents’ income tax bracket by 1% for every child they have. In practice, this will remove the tax incentive for low income parents to have children and it will add a big financial incentive for the highest earners to have more children.
The disintermediation of education by online schools and alternative credentialing/accredidation institutions.
Every major sector in our society has undergone some form of deregulation and restructuring because of new information technologies: finance; transportation; retailing etc. The one exception: education. Almost NOTHING has changed there, but its beginning to. Higher ed (not to mention most of K-12) is just a bad deal, and people are starting to wake up to that fact.
See here for example:
http://www.washingtonmonthly.com/college_guide/feature/college_for_99_a_month.php?page=all&print=true