America is a sick society

[David Horn]

(08-05-2017, 02:53 PM)Mikebert Wrote: Have you read my paper? http://escholarship.org/uc/item/42p5m46m
 

David Horn Wrote:I don't see elites factoring in the decline in economic activity that too little disposable income is already creating. 

You are right, but they didn’t last time either. 

Finally finished your paper, and agree with it nearly in full, including the issue of oblivious elites then and now.  It's easy to not-see something that is inherently distasteful.

Mikebert Wrote:

David Horn Wrote:So far, they've been good at squeezing more profits out of companies by squeezing the working class hard: offshoring, automation and the use of contractors being the most prominent.

Yes, they have been. I don’t have comparative data for last time, but the crude proxy in my paper suggests they are doing a better job now, but then I would point out that we didn’t have WW I this time. 

We also have technology now that was simply unimaginable then.  I'm not sure if the benefits outweigh the negatives, but the pace is certainly quicker now.  Shortening the analysis/decision cycle certainly increases risk, with extreme error being the most worrisome.

Mikebert Wrote:

David Horn Wrote:The real question, and you may have a better handle on this than I do: when does this start to affect revenues enough to make squeezing ineffective?  In other words, when does the merry-go-round finally stop? 

Short answer is I don’t know.  The experience last time suggests that once a sense of crisis was generated by the stock market collapse, elites came around. In summer 1932 Ben Graham (later called the “Dean of Wall Street”—Warren Buffet is his most famous protégé) wrote an article in which he stated one third of the NYSE was worth less than the cash they had on hand. That is, had private equity shops and the LBO existed back then those companies would have been bought, their employees dismissed and the physical assets liquidated, while the new owners would walk away with that cash they had bought for 90 cents on the dollar. Had this happened unemployment would have risen in 50%. And most of the rest of private businesses been wiped out. The state, would have had no choice but to act to prevent this by nationalizing all at-risk business in a controlled bankruptcy procedure that would wipe out the shareholders.  Much of the capitalist elite would cease to exist. Face with imminent risk of social death elites flocked to FDR and his “New Deal” as their last Best Hope. A massive bull market began (the greatest in history) in anticipation of their Savior. It was completely irrational; Wall Street later came to hate FDR. But in times of crisis human beings cling to life rafts, and FDR with his jaunty style and willingness to do what we necessary (he effectively ended the gold standard by presidential order—ending 200+ years of intra-elite argument, with the stroke of his pen). That simple act established the bottom and began 40 years of Democratic dominance.  It shows what the right person at the right time can do. But the timing is everything.  The grey champion must arise here: https://www.youtube.com/watch?v=76cHROrZFNc

Here, we agree in full.  I can't see an emergent philosophy to counter the current one of "animal spirits will save us from ourselves if we let them".  The Democrats are lost in their own woods, looking desperately for an answer that works without alienating anyone.  So instead, they alienate nearly everyone.  The GOP has no ideas that aren't part of the problem, so where does this Grey Champion originate?

Mikebert Wrote:

David Horn Wrote:Will the capitalists be massively overextended when it does? 

If the capitalist crisis hypothesis is valid then the stock market has a “stealth” overvaluation.  And so yes, investors will be dangerously leveraged. 

Unlike the time prior to the GD, huge amounts of capital exist in IRAs and 401ks.  If a massive decline ensues, I expect  an equally massive decline in spending by the not-wealthy owners of those funds.  If so this could be even larger in magnitude than the '29 crash.

Mikebert Wrote:

David Horn Wrote:We have a 40-year pattern of this steadily gaining speed, and the LMC and much of the MC is firmly on the side of capital.   They blame the politicians.

They vote for the other side in times of trouble, that’s not the problem.  The issue is getting the capitalist elites to back off. Only financial collapse can do that.

I we agree on that.