Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"
The increasing use of technology to replace human capital is a trend that will not reverse anytime soon and will continue to proliferate areas where unskilled, repetitive labor can be automated. This is the risk that fast food workers take by lobbying for higher wages; an ordering kiosk can be quickly employed to take orders and deliver those to an automated production line. Or better yet, why not allow customers to simply place orders on the way to the restaurant through an "app." The next time you go out take a moment to realize the impact of technology on everything you do. Also, notice how many individuals have the faces stuck into their phones being truly unproductive.
The Congressional Budget Office (CBO) just released its annual report on “The Distribution of Household Income and Federal Taxes” analyzing data through 2011 on American households. The major finding of the CBO report is that the households in the top income quintile are the real “net payers” of the US economy. The highest income quintile is basically financing the entire system of transfer payments to the bottom 60% and the entire operation of the federal government. And yet don’t we hear all the time that “the rich” aren’t paying their fair share of taxes and that they need to shoulder a greater share of the federal tax burden?
The economy we have now is like a mental patient, drugged up with so many antidepressants, antipsychotics, and mood stabilizers that the root of his problems has become undetectable. It sounds Utopian, but economic growth really is a panacea that improves standards of living for everyone in nearly every way. But instead of pursuing economic growth, the government wastes its time with piecemeal patches, trying to plug a hole whose cause remains unabated.
Cynicism is popular. Cynicism is popular these days. It's what passes off as wisdom. But cynics didn't put a man on the moon. Cynics never won a war. Cynics didn't cure a disease, or start a business, or feed a young mind. Cynicism didn't bring about the right for women to vote, or the right for African Americans to be full citizens. Cynicism is a choice. Hope is a better choice.
And so, as President, I'm going to keep a promise that I made when I first ran: Every day, I will keep asking the same question, and that is, how can I help you? And I'll keep treating your cares and your concerns as my own. And I will keep fighting to restore the American Dream for everybody who's willing to work for it. And I am going to need you to be right there with me. (Applause.) Do not get cynical. Hope is the better choice.
Many seem to believe that if we worked our way out of debt problems in the past, we can do the same thing again. The same assets may have new owners, but everything will work together in the long run. Businesses will continue operating, and people will continue to have jobs. We may have to adjust monetary policy, or perhaps regulation of financial institutions, but that is about all. I think this is where the story goes wrong. The situation we have now is very different, and far worse, than what happened in the past. We live in a much more tightly networked economy. This time, our problems are tied to the need for cheap, high quality energy products. The comfort we get from everything eventually working out in the past is false comfort.
The boom is unsustainable. Investment and consumption are higher than they would have been in the absence of monetary intervention. As asset bubbles inflate, yields increase, but so do inflation expectations. To dampen inflation expectations, the Fed withdraws stimulus. As soon as asset prices start to fall, yields on heavily leveraged assets are negative. As asset prices decline, increasingly more investors are underwater. Loan defaults rise as mortgage payments adjust up with rising interest rates. When asset bubbles pop, the boom becomes the bust.
The story of energy and the economy seems to be an obvious common sense one: some sources of energy are becoming scarce or overly polluting, so we need to develop new ones. The new ones may be more expensive, but the world will adapt. Prices will rise and people will learn to do more with less. Everything will work out in the end. It is only a matter of time and a little faith. In fact, the Financial Times published an article recently called “Looking Past the Death of Peak Oil” that pretty much followed this line of reasoning. However, energy common sense doesn’t work because the world is finite.
Has there been an economic recovery? The statistical data clearly shows that this has been the case. However, the 100 million Americans that currently depend on some sort of social assistance to "make ends meet" are likely to disagree with that view.
"...policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened...
...even when 80% of the population favored a particular public policy change, it was only instituted 43% of the time."
When the Arab Spring sprung a few years ago, the world's eyes only really cared about one nation. If Saudi Arabia's elite could not keep paying off their poor, an uprising in the world's largest oil supplier could have significant (and catastrophic) consequences for the rest of the world. Of course, between being paid to lose weight (in gold) and raising unemployment insurance, the government has kept trouble at bay. However, things are shifting. As DPA repots, two police were killed after coming under heavy gunfire while trying to arrest several Shiite activists. Of course, this is a one off but notable in its occurrence for the first time since 2011. Saudi Arabia blames Iran of inciting its Shiite citizens to disturb security and stability.
While the Federal Reserve's interventions continue to create a wealth effect for market participants, it is something only enjoyed primarily by those at the upper end of the pay scale. For the rest of the country, the key issue is between the "have and have nots" - those that have a job and those that don't. While it is true that the country is creating jobs every month, the data may be suggesting it is "as good as it gets." Of course, this is a very disappointing statement when you consider that roughly 1 in 3 people sit outside of the workforce, 20% of the population uses food stamps, and 100 million people access some form of welfare assistance. The good news is, we aren't in a recession? Yet...
As the State of the Union address highlighted, both the Russia Federation and the United States have leaders that lean toward various degrees of autocratic government to achieve their agendas. President Putin rules with an iron fist and treats the legislative branch as an afterthought to use as needed but otherwise ignores. President Obama declares he will use executive action to get what he wants and quietly uses government agencies to intimidate and stifle his opposition in flagrant abuses of power. Putin has dismantled the Russian free press and imprisoned vocal opponents. The majority of the American press does Obama’s bidding for him while the administration puts movie makers in jail.
With Washington fighting over whether to stop emergency unemployment benefits in the US, the Saudi Arabian government has re-written their economic textbooks with some wonderful new logic. In an effort to encourage its citizens to seek jobs in private companies (as opposed to the majority in government jobs - which the IMF sees as unsustainable), the Saudis are introducing compulsory unemployment insurance for all citizens with jobs. As Reuters reports, "It may not be the most cost effective solution in the near term but if it helps normalise the labour market it is a price worth paying." With unemployment at 12%, and only 30-40% labor force participation, the costs could be significant.