Economic Inequality

[Mikebert]

For change having to do with reversing economic inequality trends there is a specific answer to the problem: State collapse and reformation that serves as a secular cycle boundary.

Secular cycles are a recurrent feature in pre-industrial, agrarian societies that have recently been extended to America (in press). They show a rising (integrative) and falling (disintegrative) trend. Embedded within them are cycles of high and low unrest called fathers and sons cycles (FSC). These seem to be generational in nature like turnings.

During the disintegrative trend the high unrest periods feature state collapse (i.e. deposition and typically the death of the monarch). The down phase ends when one of this period of unrest solves the problem that causes the disinegrative trend (too many elites hoarding too much of total output, i.e. inequality). In fact secular cycles can be thought of as inequality cycles.

One way inequality has been solved in the past was wholesale slaughter of elites (e.g. Norman Invasion results in essentially no extant Saxon elites by the time of the Domesday survey or the Wars of the Roses that slaughtered a huge fraction of the nobility). Another task was diversion of elite energies into other roles. For example the onset of the disintegrative trend was delayed during the Plantagenet cycle (1080-1485) by the diversion of large numbers of elites into monasticism during the 12th century. As a result the secular cycle lasted 400 years instead of the typical 2-3 century length. Another example of non-lethal solution was the resolution provided by the Glorious Revolution. The political quarrel between the king and Parliament was resolved in favor of Parliament and the inequality problem was resolved by enlarged the pie. Up until the mid 17th century, real per capital GDP was flat. Then it started to grow, allowing elites to skim off additional wealth without driving wages of the rest of the population to starvation levels as had happened earlier in the century.

In America the most recent example of FSC periodic unrest was during the 1907-1941 secular cycle disintegrative phase. Here I quote a paper I am working on:

Quote:The progressive era contains one of the periodic episodes of high levels of social unrest in American history (Turchin 2012). These episodes define a cycle which corresponds to the “fathers and sons” cycles embedded in pre-industrial secular cycles (Turchin and Nefedov 2009:79). Pre-industrial English fathers and sons outbursts in instability that occurred during the disintegrative trend of a secular cycle typically involved internal conflict leading to the monarch being deposed and often, killed (Alexander 2016). This did not happen during the period around 1920. Rather, a pair of realigning elections over 1918-1920 replaced a Democratic-controlled government with a Republican one, which went on to rule for twelve years. The replacement of the President and Congress by an opposing party with strongly opposing ideas might be considered as equivalent to the premature end of a monarch’s reign. The incoming Republicans appeared to have resolved the crisis by restricting immigration and suppressing militant labor unions, but this was not the case

 I then quote an author who described how the Republicans set themselves up for financial crisis. I point out that the Republican solution to the FSC violence around 1920:

did not solve the underlying problem (the inequality) and so the disintegrative trend continued. Until the "elite problem" is addressed this trend will continue on and on (170 years in the case of the Plantagenet cycle).

I then continue:

Quote:the Republican state remained blind to the challenge to its legitimacy posed by the Depression. Their blindness led to a rejection far larger than had occurred to Democrats a dozen years earlier. From 1930 to 1937 the Republicans lost control of the Presidency and its share of Congress fell from about 60% to 20%. Democrats went on to hold the executive branch for the next twenty years after 1932. For the next 62 years, they would hold the Senate 84% of the time and the House 94%. Such an electoral repudiation can be seen as another “fathers and sons” outburst of political instability (of a non-violent type leading to a collapse of the old Republican order. By the time the Republicans recovered a semblance of political control in 1981, they had become a different party than they had been in 1932.The solution to the inequality problem was achieved by the New Dealers over 1933-1945, as I show elsewhere in the paper.

We only began the disintegration phase of this cycle around 2006. Last time there were numerous political responses to the problem which we know as the Progressive Era. None of them solved the problem, inequality continued to rise, leading eventually to economic collapse, as shortly after a second, larger state collapse. I submit that the reason why they did not solve the problem when things got bad around 1920 was because it was a 3T. The recessive/conservative generation in charge was not suited to enact a secular crisis (even though there were triggers galore--hell the period was the closest we have gotten to a revolutionary situation since 1774-1775.) But a little more than a decade later, despite no revolutionary situation, a solution was obtained, because a dominant/liberal generation had come to power. That is I am merging secular cycle theory with S&H theory.

Here's the problem we face. According to my best models, we saw a dominant generation come to power around 2001. That is the 4T started then. But we we were still in the integrative trend of the secular cycle (that is, inequality had not yet become a structural problem). We entered the disintegrative trend around 2006 and in that same year Congress switched parties and two years later we got Democratic control of the government and some major legislation was passed. It now looks like a Democrat will win a third term for the first time since 1940. This implies that 2008 was a critical election which is an indicator of a political moment. So the period from 2008 on qualifies as a fathers and sons cycle "up" phase. Inequality has not been addressed yet. And maybe it wont be. My best estimate is that the next recessive generation comes to power after 2020. So that implies the next four years are critical.

I believe the only way the secular cycle and secular crisis can both be resolved favorably is with an economic collapse like last cycle. As you probably know I am calling for a 10000 point drop in the Dow by 2018. If this happens and if it is accompanied by another financial crisis (I think this is 50:50) then there is a possibility for panic amongst the economic elites like the Koch bros. If the Koch's rein in the Cruz faction (who can Cruz work for after he leaves elective office when everybody hates him? He will have to attach himself to a patron and the Kochs have been friendly to him) then president Clinton would have the ability to prevent collapse. If she is smart enough to realize that unless she restores prosperity in two years she and her party will be destroyed in the next election she will hold out for a truly massive stimulus or go to full-scale crusade war to accomplish the same objective (re-election). Massive stimulus or war will be inflationary until action is taken to raise taxes to the rafters. Even then inflation could crush wealth unless they permit Clinton even more power to regulate the economy "for the duration of the crisis". Note that a war which actually costs the elites something is a war that will be WON as soon as possible and that takes care of re-election.

Something like this is the only way I can see a positive result from this 4T. More likely is Clinton is a one-term president having achieved nothing, after which GenX is in power and no resolution of the disintegrative trend will be possible for another 80 years.

This latter result is actually the more likely. Turchin dates the America secular cycles as 1780-1930 and 1930-ongoing. Since his first cycle spans two saecula, then why wouldn't his second? In this scenario this 4T will be another inconsequential 4T (from an inequality viewpoint) like the Civil War or Armada 4T and the real action will come in the next 4T long after all of us here are dead.

[pbrower2a]

Economic inequality typically intensifies during a 3T. The culture becomes more attuned to the idea that top-down economic growth (often known as "trickle-down") succeeds in creating wealth that the culture deems unsuited for criticism for ethical failures. Immigration (employers preferring to get labor on the cheap love to import workers) rises during a 3T, and the part that goes into employment depresses wages. Social cohesion and institutional trust weaken except in Big Business.

So what happens? Business promotes debased culture because such is profitable. Labor unions weaken. Education becomes vocational in focus. Hustles flourish, and toward the end of the 3T a bubble economy develops. The bubble devours capital, depressing investment in plant and equipment while feeding a speculative boom. In the Double-Zero decade as well as the 1920s the bubble was real estate.

"The Good Lord isn't making any more real estate" becomes a rationale for pricing real estate into the stratosphere. But anything can be priced into the realm of absurdity. The last buyer gets stuck with something supremely costly but suddenly worth far less. Stock market crashes as severe as those of 1929 and 2008 ensue.

[Odin]

If there is a crash with a 10,000 point Dow drop I think it will be a tech crash. There seems to be a huge bubble involving everyone and their mom trying to get into marketing on social media sites and the number companies centered around managing other companies social media presence seem to be growing at an exponential rate and reminds me a lot of the delusion that took hold in the late 90s.

[pbrower2a]

(05-06-2016, 12:32 PM)Odin Wrote: If there is a crash with a 10,000 point Dow drop I think it will be a tech crash. There seems to be a huge bubble involving everyone and their mom trying to get into marketing on social media sites and the number companies centered around managing other companies social media presence seem to be growing at an exponential rate and reminds me a lot of the delusion that took hold in the late 90s.

But there seems to be no devouring of capital as there was in the real-estate bubble in the Double-Zero decade. Social media is largely a shoestring business except for Facebook, Twitter, etc. Real crashes come from BIG investments being gutted in value.

[beechnut79]

(05-06-2016, 01:38 PM)pbrower2a Wrote:

(05-06-2016, 12:32 PM)Odin Wrote: If there is a crash with a 10,000 point Dow drop I think it will be a tech crash. There seems to be a huge bubble involving everyone and their mom trying to get into marketing on social media sites and the number companies centered around managing other companies social media presence seem to be growing at an exponential rate and reminds me a lot of the delusion that took hold in the late 90s.

But there seems to be no devouring of capital as there was in the real-estate bubble in the Double-Zero decade. Social media is largely a shoestring business except for Facebook, Twitter, etc. Real crashes come from BIG investments being gutted in value.

But aren't the cases of one-time retail giants like Sears and J. C. Penny qualifiers for big investments being gutted? And think of all those who once were great that are now extinct, such as Montgomery Ward.

[pbrower2a]

(05-20-2016, 07:16 PM)beechnut79 Wrote:

(05-06-2016, 01:38 PM)pbrower2a Wrote:

(05-06-2016, 12:32 PM)Odin Wrote: If there is a crash with a 10,000 point Dow drop I think it will be a tech crash. There seems to be a huge bubble involving everyone and their mom trying to get into marketing on social media sites and the number companies centered around managing other companies social media presence seem to be growing at an exponential rate and reminds me a lot of the delusion that took hold in the late 90s.

But there seems to be no devouring of capital as there was in the real-estate bubble in the Double-Zero decade. Social media is largely a shoestring business except for Facebook, Twitter, etc. Real crashes come from BIG investments being gutted in value.

But aren't the cases of one-time retail giants like Sears and J. C. Penney qualifiers for big investments being gutted? And think of all those who once were great that are now extinct, such as Montgomery Ward.

I remember some years ago that the average shopper in a traditional department store was....59. That was a quarter century ago. The clientele has aged into extinction.  It is possible to get away with an elderly clientele so long as the trade is in things particularly attractive to the elderly, and that there is a steady stream of elderly customers as they age into the clientele. So it is with many medical devices. There was no reason for department stores to have an aging clientele; young shoppers were not replacing old ones. The loyal customers remained and aged in place. Young adults were not developing the habit of going to the shopping center.

Recessions have a nasty habit of knocking out businesses that have been living on life support. The traditional department stores have been unable to get good help (they pay near the minimum wage, which suggests what sort of workers are available to them). The great marketing gimmicks have probably played out. The idea of getting everything in one place (so long as it is dry goods) doesn't excite people. A business committed to an obsolete model, the department-store business may itself be dying.



So what went wrong?

[Mikebert]

(05-06-2016, 12:32 PM)Odin Wrote: If there is a crash with a 10,000 point Dow drop I think it will be a tech crash. There seems to be a huge bubble involving everyone and their mom trying to get into marketing on social media sites and the number companies centered around managing other companies social media presence seem to be growing at an exponential rate and reminds me a lot of the delusion that took hold in the late 90s.

Likley.  The last stock crash in 2000 involved the same.  Although the 2007-2009 bear was bigger than the 2000-2 one, this crash is better characterized as a real estate crash like 1837, 1857, 1873, and 1893.  Both 2000 and the new crash would like be stock centric like 1907, 1929 and 1987.

[John J. Xenakis]

(05-06-2016, 12:32 PM)Odin Wrote: > If there is a crash with a 10,000 point Dow drop I think it will
> be a tech crash. There seems to be a huge bubble involving
> everyone and their mom trying to get into marketing on social
> media sites and the number companies centered around managing
> other companies social media presence seem to be growing at an
> exponential rate and reminds me a lot of the delusion that took
> hold in the late 90s.

(05-21-2016, 09:09 AM)Mikebert Wrote: > Likely. The last stock crash in 2000 involved the same. Although
> the 2007-2009 bear was bigger than the 2000-2 one, this crash is
> better characterized as a real estate crash like 1837, 1857, 1873,
> and 1893. Both 2000 and the new crash would like be stock centric
> like 1907, 1929 and 1987.

A stock market crash like 1929? As I recall, when we discussed this
ten years ago, you ridiculed the idea. Good to see you're coming
around. But 1987 really wasn't much of a crash.

[Mikebert]

JohnX Wrote:A stock market crash like 1929?  As I recall, when we discussed this ten years ago, you ridiculed the idea.  Good to see you're coming around.  But 1987 really wasn't much of a crash.

I was in 2003.  I argued that the first bear market of the secular bear market was ended, you thought we had more to go (all the way to 4000 on the Dow).  I agreed with you that that the end of the secular bear market (which then I thought would be around 2018) we would see the single-digit P/E values you were looking for.  The link shows a graph of a hypothetical secular bear market showing a series of ordinary bull and bear market cycle embedded within it.  That figure was made in early 2003, and presents my thinking at that time.

[pbrower2a]

(05-22-2016, 02:26 PM)John J. Xenakis Wrote:

(05-06-2016, 12:32 PM)Odin Wrote: >   If there is a crash with a 10,000 point Dow drop I think it will
>   be a tech crash. There seems to be a huge bubble involving
>   everyone and their mom trying to get into marketing on social
>   media sites and the number companies centered around managing
>   other companies social media presence seem to be growing at an
>   exponential rate and reminds me a lot of the delusion that took
>   hold in the late 90s.  

(05-21-2016, 09:09 AM)Mikebert Wrote: >   Likely.  The last stock crash in 2000 involved the same.  Although
>   the 2007-2009 bear was bigger than the 2000-2 one, this crash is
>   better characterized as a real estate crash like 1837, 1857, 1873,
>   and 1893.  Both 2000 and the new crash would like be stock centric
>   like 1907, 1929 and 1987.  

A stock market crash like 1929?  As I recall, when we discussed this
ten years ago, you ridiculed the idea.  Good to see you're coming
around.  But 1987 really wasn't much of a crash.

Do Keynesian economics well, and you prove the Austrian school wrong. Do Keynesian economics badly, and you will get the results that prove the Austrian school right. Sponsor a corrupt speculative boom (the "Ownership Economy" of George Worthless Bush), and get an economic meltdown. The Double-Zero Decade was practically a replay of the 1920s, and Sinclair Lewis' Babbitt caught the mood of both decades very well as it caught the mood of no intervening decades from the 1930s to the 1990s.
 
I could see the 2007-2009 crash coming when I read a Business Week article exposing the ratings scandal on packaged mortgages. It's possible to hedge risks on large volumes of well-performing risks of fault (or as in insurance, on large-scale catastrophes), but the packaging of fecal loans has no such value. Those loans should have never been made.

Sure, it was real estate, but that took much else down with it as people were suddenly disabused of the wealth effect. With the real estate crash also came crashes in the the financial sector that had supported the speculative boom, the construction business that had built the housing, building materials, household appliances, and furniture. If you are talking about General Motors -- it had more exposure to a bad economy through its lending arm (which also financed housing) as did its auto business.

A speculative bubble devours capital, pricing it out of reach of alternatives to the object of the bubble. America over-invested in real estate and under-invested in plant and equipment, agribusiness, and public-sector improvements not related to housing. When the one high-cost expenditure of the time (Boston's Big Dig) came to an end, then along came the end of the real estate boom. The real estate boom ensured under-investment in energy development and investments in job-creating plant and equipment.  So when the housing market goes kaput,  there is nothing left. The economy implodes.

It's the bubble that does the harm; the financial panic at its end is simply the recognition of the speciousness of the alleged wealth of the speculative boom.

[John J. Xenakis]

JohnX Wrote:> A stock market crash like 1929? As I recall, when we discussed
> this ten years ago, you ridiculed the idea. Good to see you're
> coming around. But 1987 really wasn't much of a crash.

(05-26-2016, 10:03 AM)Mikebert Wrote: > I was in 2003. I argued that the
> first bear market of the secular bear market
> was ended, you thought we had more to go (all the way to 4000 on
> the Dow). I agreed with you that that the end of the secular bear
> market (which then I thought would be around 2018) we would see
> the single-digit P/E values you were looking for. The link shows
> a graph of a hypothetical secular bear market showing a series of
> ordinary bull and bear market cycle embedded within it. That
> figure was made in early 2003, and presents my thinking at that
> time.

Well, we had many, many discussions subsequent to 2003, all the way
until things went completely off the rails in 2008.

I did a quick search through some old files, and found a length e-mail
exchange we had in 2004, in which you said the following:

Quote:> I believe there is a difference between your views and mine. I say
> we don't go below 700 on the S&P500. And I back it up with my
> 401(k) stock allocation and have stated such in real time. I
> believe you have stated the S&P500 will go below 700 in the next
> few years. Is this true?

> At what point in time will you throw in the towel on your model if
> the S&P500 continues to stay well above 700? For example, suppose
> we get to 2008 and the S&P500 is much higher than it is today
> without ever going below 900 between now and then, will this
> invalidate your model?

> If not, then how is your view different than mine?

The mistake that I made was trying to assign dates to events.
Generational Dynamics uses MIT's System Dynamics applied to
generational flows to determine trends and events that MUST occur
(like a global financial panic and crash), and uses Chaos Theory to
determine what CAN'T be predicted (like election results). The two
come together particularly in something like this, where one can
predict there must be a global financial panic and crash, and Chaos
Theory says that you can't predict the date or event that will trigger
it.

By 2007 I was stating the prediction more accurately: that increasing
public debt was a trend that would not be reversed until there was a
global financial panic and crash.

What's happened in the meantime is truly astonishing. Central banks
around the world have pumped money into the stock market, during a
deflationary spiral while growth is flattening. This is creating huge
interlocking debts, such that a major bankruptcy will trigger a chain
reaction, and even the printing presses won't be able to keep up, as
they did after the Lehman collaps.

Today there are lots of people who recognize that the global financial
situation is so screwed up that it can't end up anywhere but in
disaster. And because of your reference to the 1929 crash, I assumed
that you were one of them, and had reversed your position in ten
years.

[John J. Xenakis]

(05-26-2016, 11:52 AM)pbrower2a Wrote: > Do Keynesian economics well, and you prove the Austrian school
> wrong. Do Keynesian economics badly, and you will get the results
> that prove the Austrian school right. Sponsor a corrupt
> speculative boom (the "Ownership Economy" of George Worthless
> Bush), and get an economic meltdown. The Double-Zero Decade was
> practically a replay of the 1920s, and Sinclair Lewis'
> Babbitt caught the mood of both decades very well as it
> caught the mood of no intervening decades from the 1930s to the
> 1990s.

> I could see the 2007-2009 crash coming when I read a Business
> Week article exposing the ratings scandal on packaged
> mortgages. It's possible to hedge risks on large volumes of
> well-performing risks of fault (or as in insurance, on large-scale
> catastrophes), but the packaging of fecal loans has no such
> value. Those loans should have never been made.

I'd be interested in seeing something where you made such a prediction
in 2006-7. Perhaps you can find something in the tft archive.

http://generationaldynamics.com/tftarchive

If you're going to blame the 2007-9 crash on Bush, then you have to
blame the 2000 Nasdaq crash on Clinton, and you have to blame the
approaching crash on Obama. Actually, if you're going to be
political, then you could blame both the Nasdaq crash and the 2007
crisis on Clinton.

In fact, none of that is true. Keynesian economics is completely
wrong because it doesn't take generational theory into account. The
Austrian school is completely wrong because it doesn't take
generational theory into account. No politician could have either
caused or prevented any of the bubbles or crashes we're seeing. The
1990s bubble occurred because that was exactly the time that the
survivors of the 1929 crash and Great Depression retired. The
mid-2000s credit and real estate bubbles occurred because the
destructive, self-destructive financial engineers of Generation-X
wanted to to screw their fathers, and ended up screwing everyone.

You might find it intesting to know that the real estate bubble
began in 1995.

** The housing bubble began in 1995.
** http://www.generationaldynamics.com/pg/x...tm#e090908

[Mikebert]

(05-27-2016, 03:26 PM)John J. Xenakis Wrote:

JohnX Wrote:>   A stock market crash like 1929?  As I recall, when we discussed
>   this ten years ago, you ridiculed the idea.  Good to see you're
>   coming around.  But 1987 really wasn't much of a crash.  

(05-26-2016, 10:03 AM)Mikebert Wrote: >   I was in 2003.  I argued that the
>   first bear market of the secular bear market
>   was ended, you thought we had more to go (all the way to 4000 on
>   the Dow).  I agreed with you that that the end of the secular bear
>   market (which then I thought would be around 2018) we would see
>   the single-digit P/E values you were looking for.  The link shows
>   a graph of a hypothetical secular bear market showing a series of
>   ordinary bull and bear market cycle embedded within it.  That
>   figure was made in early 2003, and presents my thinking at that
>   time.  

Well, we had many, many discussions subsequent to 2003, all the way
until things went completely off the rails in 2008.

I did a quick search through some old files, and found a length e-mail
exchange we had in 2004, in which you said the following:

Quote:>   I believe there is a difference between your views and mine. I say
>   we don't go below 700 on the S&P500. And I back it up with my
>   401(k) stock allocation and have stated such in real time. I
>   believe you have stated the S&P500 will go below 700 in the next
>   few years. Is this true?

>   At what point in time will you throw in the towel on your model if
>   the S&P500 continues to stay well above 700? For example, suppose
>   we get to 2008 and the S&P500 is much higher than it is today
>   without ever going below 900 between now and then, will this
>   invalidate your model?

>   If not, then how is your view different than mine?

The mistake that I made was trying to assign dates to events.
Generational Dynamics uses MIT's System Dynamics applied to
generational flows to determine trends and events that MUST occur
(like a global financial panic and crash), and uses Chaos Theory to
determine what CAN'T be predicted (like election results).  The two
come together particularly in something like this, where one can
predict there must be a global financial panic and crash, and Chaos
Theory says that you can't predict the date or event that will trigger
it.

By 2007 I was stating the prediction more accurately: that increasing
public debt was a trend that would not be reversed until there was a
global financial panic and crash.

What's happened in the meantime is truly astonishing.  Central banks
around the world have pumped money into the stock market, during a
deflationary spiral while growth is flattening.  This is creating huge
interlocking debts, such that a major bankruptcy will trigger a chain
reaction, and even the printing presses won't be able to keep up, as
they did after the Lehman collaps.

Today there are lots of people who recognize that the global financial
situation is so screwed up that it can't end up anywhere but in
disaster.  And because of your reference to the 1929 crash, I assumed
that you were one of them, and had reversed your position in ten
years.

No, what I am predicting is in line with what I expected in 2003.  I use a valuation tool called P/R.  R(t) is the integral of real retained S&P500 earnings from for x = 1871 to t plus the real value of the index in 1871. R for any year can be converted to a nominal value using the CPI deflator.  The ratio P/R then provides a valuation measure that resembles Tobin's q.  Duirng a secular bear market P/R declines from a high value at the beginning to a low value at the end.  Typically the starting value is about 1.2-1.3 and the ending value is about 0.25-0.3.  Initial values have ranged from 1.1 to 1.5.  The current secular bear began at 1.5.  Typically P/R shows a downward trend, but over 1929-1932 it fell all the way down to sub 0.25, and the then bounced around for 17 more years until it began a new secular bull market from the 1949 P/R of 0.25. 

Had we gotten 1929-like crash the S&P would have fallen to the 300's with a Dow around 3000, which is about what you were looking for.  I believed that the Fed would throw a wall of money at any decline, preventing it full development, which is what happened.  In 2008 the Dow did not reach the ca 4000 level consistent with P/R = 0.25.  I am calling for a 10000 point drop in the Dow with the coming recession.  This is also not a P/R=0.25 event.  If we get a panic this time I do expect it to drop further in which the P/R=0.25 limit will come into play and we might see a Dow of 5000. That's a long way down, but still not the 3000 or 4000 you were looking for.

If we don't get the panic, then I would expect one more bull market/bear market cycle before the secular bear market / 4T ends, at which point P/R = 0.25 will correspond to about 7000.

[John J. Xenakis]

Interesting graph:



What's perhaps most interesting is that the black line appears to have
"gone parabolic," indicating that we're headed for the worst disaster
ever, with which I would not disagree.

[Mikebert]

(05-27-2016, 04:21 PM)John J. Xenakis Wrote: Interesting graph:



What's perhaps most interesting is that the black line appears to have
"gone parabolic," indicating that we're headed for the worst disaster
ever, with which I would not disagree.

You noticed that too, eh?  It's really anomalously high.  Either we are in for a big decline or the Stock Cycle concept no longer applies.

[Odin]

Guys, quit putting your replies inside the quote boxes, it's making it hard to tell who is saying what!

[Ragnarök_62]

(05-28-2016, 05:34 PM)Odin Wrote:

Odin the whiner Wrote:Guys, quit putting your replies inside the quote boxes, it's making it hard to tell who is saying what!

OK, how does this post look?

[pbrower2a]

(05-27-2016, 03:44 PM)John J. Xenakis Wrote:

(05-26-2016, 11:52 AM)pbrower2a Wrote: >   Do Keynesian economics well, and you prove the Austrian school
>   wrong.  Do Keynesian economics badly, and you will get the results
>   that prove the Austrian school right. Sponsor a corrupt
>   speculative boom (the "Ownership Economy" of George Worthless
>   Bush), and get an economic meltdown. The Double-Zero Decade was
>   practically a replay of the 1920s, and Sinclair Lewis'
>   Babbitt caught the mood of both decades very well as it
>   caught the mood of no intervening decades from the 1930s to the
>   1990s.

>   I could see the 2007-2009 crash coming when I read a Business
>   Week article exposing the ratings scandal on packaged
>   mortgages. It's possible to hedge risks on large volumes of
>   well-performing risks of fault (or as in insurance, on large-scale
>   catastrophes), but the packaging of fecal loans has no such
>   value. Those loans should have never been made.

I'd be interested in seeing something where you made such a prediction
in 2006-7.  Perhaps you can find something in the tft archive.

http://generationaldynamics.com/tftarchive

I remember my visceral reaction, but I am not sure whether or where I posted my concern. For all I know I may have posted my concern in some news chatline that does not exist now (the old New York Times Forums?) or does not keep posts from the time. Yes, if it was not published and does not remain published, then it might as well not exist.

Quote:If you're going to blame the 2007-9 crash on Bush, then you have to
blame the 2000 Nasdaq crash on Clinton, and you have to blame the
approaching crash on Obama.  Actually, if you're going to be
political, then you could blame both the Nasdaq crash and the 2007
crisis on Clinton.

But Bill Clinton did not sponsor the dot.com boom. More significant may have been the fall of the gigantic Enron Corporation (which I often slurred as "Enrot", "Enrotten", and "Enrob" as its business tactics and weird structure of partnerships between the company and its directors) -- but Enron had its connections with Republican politicians, especially in Texas.

Quote:In fact, none of that is true.  Keynesian economics is completely
wrong because it doesn't take generational theory into account.  The
Austrian school is completely wrong because it doesn't take
generational theory into account.  No politician could have either
caused or prevented any of the bubbles or crashes we're seeing.  The
1990s bubble occurred because that was exactly the time that the
survivors of the 1929 crash and Great Depression retired.  The
mid-2000s credit and real estate bubbles occurred because the
destructive, self-destructive financial engineers of Generation-X
wanted to to screw their fathers, and ended up screwing everyone.

The generational theory puts more importance on the political and cultural activity of a generation, and that is very different from retirements from manufacturing industries. A generation's peak power in defining the institutions in which it has influence is just before its first members start retiring. But it is not the workers or even managers who create the culture; it is the directors, judges, and professors who have some of the cushiest jobs and are most able to protect the agenda of their generation. Directors, judges, and professors can stick around until they get carried off in stretchers or decide that they are dying.

The last to remember a folly as well as its consequences who still have some influence are the last to resist the folly when it appears in some tempting guise. Such may be the childhood memories of people in their early eighties, but child memories are extremely strong. Maybe those in leadership roles at advanced age have reinforcement of their memories from having full educations in the wake of the folly as others do not. So pedagogy meets early memories and enforces those memories. People younger than the youngest to remember some traumatic event don't absorb the lesson in quite the same way.

So the youngest people to remember the Stock Market Crash of 1929 are the last wave of the GI Generation. Such people may put up the most vehement resistance to deeds likely to bring about a repeat of the folly. Once those people are off the scene, the temptations that brought about the folly eighty years earlier overpower such resistance as people have to the folly.

Remember: all blunders and follies have some initial attraction. Without the initial attraction nobody would ever fall for a course leading to disaster. The people who have seen it all before can give good reasons to not fall to the blunder. But when those have seen it all are all dead, senile, or otherwise off the scene, people who do not know from their own experience are up to their own wisdom for judgment. Dead people have no loyal constituency.

Thus GIs who remembered the speculative boom of the late 1920s leading to economic calamity could stop a repeat of such a calamity until about 2005.

Quote:You might find it interesting to know that the real estate bubble
began in 1995.

** The housing bubble began in 1995.
** http://www.generationaldynamics.com/pg/x...tm#e090908

The bubble accelerated in its destructiveness a few years later.

But note some of the consequences of what I say here. Although I still consider George W. Bush a singularly awful President, I cannot put all the fault on him for the economic meltdown that manifested itself in the year and a half of economic downturn, one that after a year and a half was as destructive as the downturn beginning with he Crash of '29, completely upon Dubya. Yes, I can still interpret his dreadful Presidency as practically a telescoping of the worst traits of the Harding, Coolidge, and Hoover administrations into eight years instead of twelve, but I can no longer make him a villain for the economic meltdown (The bungled response to 9/11, the mishandling of Hurricane Katrina, and the military disaster in Iraq  are separate from this). As around 1920 America was highly receptive to weak leadership that would indulge Americans' greed, intellectual laziness, and moral lassitude.  Republicans could have nominated a stronger leader than Dubya who would not have made the same mistakes -- and did not. Americans had the chance to elect Al Gore, who would have basically continued the agenda of Bill Clinton (which had worked well enough).

2000 marks, much as did 1920 roughly eighty years ago, the start of the last phase of a Third Turning: what I call the Degeneracy, a time of depraved mass culture, weak government unable or unwilling to address the moral issues of the time, and business practices that sink to the worst for about eighty years. A Degeneracy eventually pushes society as a whole onto a destructive course to be rectified only in a Crisis.

[Galen]

(05-26-2016, 11:52 AM)pbrower2a Wrote:

(05-22-2016, 02:26 PM)John J. Xenakis Wrote:

(05-06-2016, 12:32 PM)Odin Wrote: >   If there is a crash with a 10,000 point Dow drop I think it will
>   be a tech crash. There seems to be a huge bubble involving
>   everyone and their mom trying to get into marketing on social
>   media sites and the number companies centered around managing
>   other companies social media presence seem to be growing at an
>   exponential rate and reminds me a lot of the delusion that took
>   hold in the late 90s.  

(05-21-2016, 09:09 AM)Mikebert Wrote: >   Likely.  The last stock crash in 2000 involved the same.  Although
>   the 2007-2009 bear was bigger than the 2000-2 one, this crash is
>   better characterized as a real estate crash like 1837, 1857, 1873,
>   and 1893.  Both 2000 and the new crash would like be stock centric
>   like 1907, 1929 and 1987.  

A stock market crash like 1929?  As I recall, when we discussed this
ten years ago, you ridiculed the idea.  Good to see you're coming
around.  But 1987 really wasn't much of a crash.

Do Keynesian economics well, and you prove the Austrian school wrong.

It is not possible to do Keynesian economics well because of its internal contradictions.  After nearly a century of failure you think this would be obvious.  Its a bit like socialism in that respect because not matter how hard you try it is not possible to do that well either.

[radind]

(05-28-2016, 10:23 PM)pbrower2a Wrote: 2000 marks, much as did 1920 roughly eighty years ago, the start of the last phase of a Third Turning: what I call the Degeneracy, a time of depraved mass culture, weak government unable or unwilling to address the moral issues of the time, and business practices that sink to the worst for about eighty years. A Degeneracy eventually pushes society as a whole onto a destructive course to be rectified only in a Crisis.

It is sad and tragic that we cannot act to correct things before a Crisis occurs. But the cycle does seem to repeat.