Decline of the Empire

Obama's Version Of The Energy Speech

Even in the days after he won the 2008 presidential election, but before he took office, it was obvious to some of us that Barack Obama was a political hack and nothing more. It was obvious the O-Man had no grand vision for a New America. Business-as-usual would continue because Obama lives inside the usual political box.

The President's oil speech yesterday gave us another example of what politics-as-usual means. Obama had never bothered to address America's outsized oil consumption until we experienced a mini-price shock after the revolts in Egypt and Libya. Only recently did it became necessary for him to give us the usual foreign oil dependency boilerplate. Like every president before him, he gave us a goal and a time frame. We will cut our imports by a third in "a little more than" 10 years by 2025, which is about 3.7 million barrels-per-day (based on our 2008 imports) if U.S. production were to remain constant over those 15 years. What do you think the chances of that are?

How we will achieve this miracle is mostly irrelevant, although it is not obvious how we will produce more biofuels when we already use 40% of our corn crop to brew moonshine. And it not obvious how the new fuel mileage standards, which start in 2012, will make much of a dent in gasoline consumption when few Americans can afford to buy a new car. (This is called the light vehicle turnover rate.) And it is not obvious how we will increase our domestic production, which is due to decline over the next two years. But never mind all that.

Just as with any other issue, the problem posed by America's super-sized oil consumption is held captive by our corrupt, dysfunctional politics. As I've said, politics makes you stupid. Consequently, the debate about the issue is predictably shortsighted, simplified and mindless. Here's the way it works. The stupefied Democrats (liberals, left-wingers, etc.) are pro-environment and anti-oil. The imbecilic Republicans (conservatives, right-wingers, etc.) are anti-environment and pro-oil.

It's really just this simple. This is how the debate is always framed. In actuality, the only thing that matters is the current election cycle. I've been watching this fucking charade for almost all my adult life. I'm so sick and tired of it at this point that I can hardly bring myself to describe it, even briefly.

Like it or not, our civilization, such as it is, was built on the back of fossil fuels. Oil is the most energy dense of these fuels. Some people think gold is the most precious substance on Earth. That's silly. Oil is and always will be the most precious substance on Earth. But in the past, there has been a lot of it, relative to our needs, so humans forgot that oil is so precious. Having convinced themselves they have an almost infinite supply of the stuff, humans became profligate in their consumption of it.

Over the last decade, it became clear that the oil supply is not all it was once cracked up to be. Prices rose, wars were fought, good, highly-valued crudes became scarce, and discoveries continued to fall short of our needs. Yes, extraction technology improved, but rising rates of consumption more than made up for grudging, incremental improvements there. All the "big picture" evidence pointed to a unique historical event: the Oil Age was drawing to a close. Some observers came up with a name for the twilight times. They called it Peak Oil.

Yet our pandering politicians have stuck with the same myopic script. President Obama, a political animal extraordinaire, is certainly no exception to the rule. As I forced myself to read through the reactions to and commentary on the O-Man's speech, I was painfully aware that I was reading exactly the Same Old Shit I've been reading for years and years. The oil companies are sitting on leases they're not developing! (Democrats, Obama) Drill in Alaska! (Republicans, McConnell) And so on.

Obama is merely the latest politician to give us the same stale, pointless speech. The President is a tool with only one agenda: to get re-elected. Mitch McConnell is a tool with only one agenda: for the Republicans to take over the government. There's no historical sense at all. No sense of a crisis in the making. No sense that civilization will have to take a different tack if we want to preserve it for future generations.

Here's a "chicken & egg" conundrum. We know that people living Inside The Beltway exist in a weird kind of bubble. Rahm Emanuel called it fuck-nuts-ville.  But unbeknownst to us, is there is a kind of "force field" around our Nation's Capital that makes its residents exceedingly dense & stupid? Or is it that only exceedingly dense & stupid people are drawn to Washington, D.C. in the first place? Just something to think about.

These politicians are so dumb, so blind, so obtuse, so self-interested, so drunk with power, that they can only think of politics-as-usual as they unknowingly rearrange the deck chairs on the Titanic. I've seen far more of this crap than I can stand. I've seen more than enough of this embarrassing spectacle. I won't put up with it anymore. Don't bother to wake me up when our next president gives us his version of The Energy Speech. Enough is enough.

Bonus Video — Don't take my word for it. Here's Obama's entire speech, 47 minutes of bullshit.

 

General Electric's "Imagination At Work"

Some posts almost write themselves. Fortunately for me, this is one of those days. The New York Times gave us the goodies in G.E.'s Strategies Let It Avoid Taxes Altogether.

General Electric, the nation’s largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American [Federal] tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm.

Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

The GE Tax Story — click on the image to enlarge in a new window or tab

This would be good time to remember that the O-Man hired GE's chief executive Jeffrey Immelt to be his liaison to the business community and the chairman of the President’s Council on Jobs and Competitiveness, which is expected to discuss corporate taxes according to the Times. But is a multinational CEO the best choice to be your jobs czar?

In the wake of Jeffrey Immelt's ascent to the chairmanship of President Obama's jobs council, some commentators have questioned whether the leader of General Electric, a company that has sharply reduced its United States payrolls over the years, is the best person to be orchestrating a jobs revival.

Among executives of multinational companies, Mr. Immelt is hardly alone in having presided over a major reduction in domestic jobs amid a major increase in foreign jobs. Witness the following chart, which shows changes in domestic and foreign employment at American multinational companies from 1998 through 2008 (that is, the decade leading up to the financial crisis):

Source

This would also be good time for us to recall all of the following—

And the madness continues: When General Electric settled SEC securities fraud charges yesterday by paying a fine of $50 million, it was chump change in the context of the volume of federal assistance the company has already received.

"GE bent the accounting rules beyond the breaking point," said Robert Khuzami, Director of the SEC's Division of Enforcement....

But the most egregious part is that the settlement is being made with our money. Back in November, the federal government agreed to insure as much as $139 billion in debt for GE Capital.

So $50 million fine or no, GE is much better off for the help of friendly regulators in Washington. This is exactly the same story as we saw with Bank of America two days ago, which settled SEC fraud charges by returning about 1/5th of 1% of the bailout money it had received.

But I digress. The usual reaction to General Electric not paying any Federal taxes is to complain about the complexity of the tax code. Everyone agrees that considerable simplification is in order. With a simplified tax code, General Electric could not use its in-house "world’s best tax law firm" to avoid paying Federal income tax. But how did the tax code get so complex? Here's a short multiple-choice quiz. The tax code—

A. was designed by dyslexic accountants at the IRS
B. was written by an army of monkeys banging on typewriters
C. was crafted by corrupt legislators rewarding those who had bribed them
D. was written by space aliens from the Virgo Cluster, who were subcontracted to do the job.

If you answered "C", congratulations!

Insert my usual acerbic comment about how far gone our society is <HERE>.

Bonus Video from The Daily Ticker (formerly Tech Ticker). Henry and Aaron talk about General Electric.

 

Gotta Love That Worker Productivity!

Today we have another story typical of our times, another episode of our favorite daytime soap opera The Rich Get Richer. Corporations are piling up huge profits and sitting on huge piles of cash even as they lobby for lower taxes and avoid hiring new workers. McClatchy gives us the story in Strong corporate profits amid a weak economy - what's up with that?

WASHINGTON — U.S. corporations continue to post strong profits quarter after quarter, even as the unemployment rate remains high and the U.S. economic recovery plods along in fits and starts. What gives?

Corporate profits grew 36.8 percent in 2010, the biggest gain since 1950, according to Friday's latest report from the Bureau of Economic Analysis. No sign could be more clear that U.S. companies see the so-called Great Recession in the rearview mirror.

The strong profits, however, mask the continued difficult terrain for businesses. Yes, profits are high, but that doesn't mean business is strong.

[U.S. Chamber of Commerce chief economist Martin] Regalia and other analysts think several factors are behind the strong profits, which seem to contradict other indicators of an underperforming economy, especially the 8.9 percent unemployment rate. These factors include record low interest rates since late 2008, muted demand for borrowing by companies and a surge in productivity that has allowed companies to do more with the same number of workers or fewer.

Profits aren't rising solely because companies are making and selling more widgets to keep up with customer demand, which would be the case in a healthy, booming economy. Instead, they're more profitable because it now costs less to make the same widget, often because there are far fewer workers needed to make it...

According to the Gallup polling, unemployment is 10.2%, but more importantly, worker productivity is on the rise.

Another explanation for strong corporate profits has been growth in productivity, or hourly output per worker. The Labor Department reported on March 3 that annual average productivity rose by 3.9 percent in 2010. Aside from that strong productivity growth, unit labor costs fell during the same period by 1.5 percent. That reflects that worker compensation didn't keep pace with rising output. Put another way, businesses produced more than compensation rose.

Normally, companies can squeeze only so much out of workers before they must hire more of them or fall behind competitors. Many economists thought hiring would have picked up by now as productivity rose, yet job creation continues to lag.

You gotta' love it! Why hire more workers or properly compensate current workers when you can squeeze more work out the poor bastards, who probably feel lucky to have a job at all. Don't you love capitalism when it's firing on all eight cylinders? When profits are high and workers have no bargaining power? It's like a wet dream for grossly overpaid corporate CEOS. If we just wait a little longer, we'll be back to the glory days of the 1890s.

And let's not leave out those overseas sales.

Another factor in today's strong corporate profits also might mask how sluggish the U.S. recovery has been — the growing percentage of profits from foreign sales by U.S. corporations.

That number climbed steadily over the past decade and peaked at 45.3 percent in 2008. That underscores how globalization has made it harder to define winners and losers. Americans are wrestling with high unemployment, but overseas sales have boosted U.S. corporate profits.

That, in turn, lifts the stock market, which lifts the wealth of workers with 401(k) retirement plans and company shareholders alike.

We should recall here that approximately 83% of stocks and mutual funds are owned by the wealthiest 10% of Americans, as I discussed in Our Outrageous Bubble Economy. McClatchy gives us the Big Picture—What Gives?

As bad as this picture is, McClatchy's graph (lower right) does not show us the longer-term trend in worker productivity. For that, we turn to the Economic Policy Institute's The Sad But True Story Of Wages In America.

Essentially, economic policy has not supported good jobs over the last 30 years or so. Rather, the focus has been on policies that were thought to make consumers better off through lower prices: deregulation of industries, privatization of public services, the weakening of labor standards including the minimum wage, erosion of the social safety net, expanding globalization, and the move toward fewer and weaker unions. These policies have served to erode the bargaining power of most workers, widen wage inequality, and deplete access to good jobs.

Whole lotta' squeezing going on!

Even this graph does not do the situation justice, because the EPI economists have committed the "One Economy" fallacy: they have calculated wage increases for all workers without taking into account America's growing income inequality. See my post America's Invisible Poor.

There are so many atrocities here that I can't cover them all in one post. The McClatchy article also talks about how American corporations are not investing (in new plant, equipment, etc.) in the United States. And why would they? America has been bled dry, as I described in Invest In America? Why Bother? And I haven't even mentioned jobs outsourcing.

There are few moments when I am more embarrassed to be a human being than those mornings when vacuous newsreaders on National Public Radio tell me that American worker productivity has surged once again. And they're so proud as they say it! As they crow about our astonishing productivity, I am looking for a place to hide.

When Integrity Dies

Today's title is a riff on When Money Dies: The Nightmare of the Weimer Hyperinflation by Adam Fergusson, which was published in 1975. Author Frederick J. Sheehan recently drew some interesting parallels between Germany in the early 1920s and contemporary America in Weimar Angst and the United States Today.

Some characteristics of Weimar Germany are apparent in the United States. Parallel observations are sometimes less than they appear (e.g., in both cases, the people enjoyed eating meat), but are striking. The German incident happened over four years (also arbitrary. It can be argued that any year from 1914 to 1921 was the point of departure.)

Similarities to the U.S. have been in motion for 30 years or so. These include:

1. a high concentration of wealth among those who leverage [i.e. those who exert great influence or power, e.g. the banks]
2. the middle- and lower-classes falling behind, but not understanding or knowing it (or, knowing it but not allowing themselves to think about it)
3. the rise of a gambling culture
4. including financial speculation on the stock exchange, which spread to all ranks of the population [as in the Tech/Nasdaq bubble]
5. the blossoming of a financial industry, with quantity crushing quality (Weimar bank tellers became financial advisers since most people were at a loss, and would take any advice, which was often horrible, but probably well-intentioned)
6. the "striking displays of luxury beside poverty" (quoting Fergusson)
7. a "growing lack of concern for one's fellow man" (the difference between greed and the attempt to survive is blurred)
8. values are distorted, in both senses, the one feeding the other: a wife selling her husband's gold watch for four potatoes
9. the quality of goods (and services) collapses (an evolution with consequences to morale and personal dignity)
10. the denial by the central bank that it is in any way attached to the inflation

As lists go, this one is pretty good. Obviously, comparisons of Weimer and America will inevitably breakdown. That said, Sheehan has done a good job of identifying trends characterizing a society which has lost its integrity, which has these meanings—

1. adherence to moral and ethical principles; soundness of moral character; honesty
2. the state of being whole, entire, or undiminished: to preserve the integrity of the empire
3. a sound, unimpaired, or perfect condition: the integrity of a ship's hull

I have touched on a number of these themes, but was particularly struck by #2 and #7 , which are central tenets of this blog—

#2 - the middle- and lower-classes falling behind, but not understanding or knowing it (or, knowing it but not allowing themselves to think about it)

#7 - a "growing lack of concern for one's fellow man" (the difference between greed and the attempt to survive is blurred)

These are concise statements of what's going on in this country, which I have likened to a giant game of Survivor (the TV show, in its many popular incarnations).

Sheehan gave us this list in a context of hyperinflation, which can be defined as a total loss of faith in the currency (the dollar). I don't think this is a likely outcome in the United States, at least in the foreseeable future. Looking around, it appears that the winner is stagflation similar to what we experienced in the late 1970s. Thus we have a wrecked economy combined with rising inflation, especially in food & energy. This may change. We will have to await future events before we know what the outcome will be.

But there is no similar uncertainty about the evolution of American society. Once High & Mighty, we are now Fallen. Once a society loses its vitality, wholeness and character, and its ability to discern Right from Wrong—even its ability to care about that distinction is lost—that society is doomed. America is now a waning Empire, its best days behind it.

Once lost, integrity is gone forever. When integrity dies, it's all downhill from there. That's the bad news.

The Utter Failure Of Macroeconomic Theory

I was interested to read A Balanced Debate About Reforming Macroeconomics by Joseph E. Stiglitz. A professor at Columbia University and a Nobel Laureate in Economics, Stiglitz is on the "liberal" neo-keynesian side of the policy fence.

The most remarkable aspect of the recent conference at the IMF on Macro and Growth Policies in the Wake of the Crisis was the broad consensus that the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed. They failed to predict the crisis; standard models even said bubbles couldn't exist --  markets were efficient.

Even after the bubble broke, they said the effects would be contained. Even after it was clear that the effects were not "contained," they provided limited guidance on how the economy should respond. Maintaining low and stable inflation did not ensure real economic stability. The crisis was "man-made." While in standard models, shocks were exogenous, here, they were endogenous [i.e. arising from within the system itself].

There was even remarkable consensus about many elements of policy in responding to the crisis: fiscal policy can work; we need to be wary of empirical studies based on circumstances markedly different from the current situation (where households are overleveraged, where interest rates have reached the zero lower bound, etc.).

There were large areas of consensus for the longer run: central banks will focus on more than just inflation, especially financial stability; but there will be a real challenge in developing an integrated approach.

The ultimate objective of a central bank is to stabilize the real economy, and financial and price stability both need to be seen as instruments toward this and other ultimate objectives. In achieving real stability, much stronger financial regulation will be required -- both because of agency issues and the pervasiveness of externalities, self-regulation cannot be relied upon. Real stability will require a full range of tools for capital account management, including cross-border regulations on capital flows.

It is remarkable that after well over 100 years of theories about how to manage economies, economists are once again gathering together to examine their blatant failures. But it is truly astonishing that there was so much faith in the Invisible Hand that the Federal Reserve thought it could run the economy by focusing almost exclusively on the rate of inflation. I have been reading Robert Skidelsky's Keynes: Return Of The Master. Consider this passage from page 44—

To the non-economist, these [theoretical] debates may seem to have little or nothing to do with the crisis and how to get out of it. This is to ignore their influence on policy. The policy regime that followed the Reagan-Thatcher revolution reflected to a large extent the ideas of the New Classical economists.

[My note: "New Classical economists" — the Chicago school, with their efficient markets, etc. as opposed to the "New Keynesians" as Skidelsky calls them. These are the clowns whose failures the IMF conference Stiglitz attended was meant to address. Neither school of thought anticipated or understands the crisis.]

... Consumer price stability became the main, and often the only, goal of macroeconomic policy, and monetary policy was considered sufficient by itself to ensure macroeconomic stability.

Concern with credit, banking, asset prices, and financial stability was downgraded. Budgets should be balanced and debt-to-GDP ratios stabilized, since rising debt threatened the solvency of governments, and all deficits did was to raise interest rates and thus 'crowd out' more efficient private activity. To apply these policies one needed independent central banks with mechanical rules—like the so-called Taylor Rule, devised in 1993 by the economist John Taylor for relating interest-rate changes to projections of inflation.

Efficient market theory also lay behind the extensive deregulation of the last twenty years: the repeal of the Glass-Steagall Act, the acceptance of bank self-assessment of risk, the failure to regulate the market for derivatives.

This passage may appear to be, as Skidelsky intended, a straightforward elucidation of economic theoretical failures, but it is not. In fact, Skidelsky has got the world exactly ass-backwards. The assumption made here is that "New Classical" macroeconomic theory, as expressed in policy, drove the "Reagan-Thatcher revolution" in subsequent years. It was this revolution which delivered us to the sorry fate we enjoy today. Here is the reality—

• Politics always drives policy. Economic theories are always post hoc (after the fact) rationalizations of pre-conceived agendas. Any policy, no matter how unfair or crazy, will always find economists to support it. Thus are careers established, good salaries made, high appointments in government achieved. Economics is always the handmaiden of politics, not the other way around. Note well that the adoption of "New Classical" macroenomic theory followed the "Reagan-Thatcher revolution" according to Skidelsky. Governments after Reagan simply continued or implicitly endorsed the same policies.

It is absurd for Skidelsky to assert that "the repeal of the Glass-Steagall Act, the acceptance of bank self-assessment of risk and the failure to regulate the market for derivatives" was due to the general acceptance of efficient market theory. Plainly, all of these outcomes—which Stiglitz and the rest say must now be corrected through theoretical revisions— were due to the free rein given to banks and others by the influence of these special interests on political policy, a phenomenon also known as rampant corruption. What did Senator Dick Durbin (D-Ill)  say about Congress and the banks?

And the banks — hard to believe in a time when we're facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.

It's bad enough that macroeconomics is not a science and relies on a caricature of Human Nature in its formulations. (Those who take a more nuanced view of human behavior, like Hyman Minksky, are completely ignored.) Here in the Real World, economic theories always serve political ends. A moment's reflection will tell you that it can not be any other way. If macroeconomics were a science like physics, there would no policy options at all. Ultimately, economic policy will determine where the money goes and who is on the receiving end. This alone should be sufficient to persuade you that macroeconomics is merely politics in disguise.

The "Reagan-Thatcher revolution" led directly to a society in which wealth & income inequality is greater than at any time since the late 1920s. It led to globalization and "free trade" under which America's manufacturing base shrank and shrank, median incomes declined, and American jobs went overseas. And so on. The list of disasters is very long.

I suppose it is trivial to say that academic economists do not live in the real world. As Stiglitz said, standard models said bubbles couldn't exist! However, the damage their theories rationalize can not be easily undone. In the case of our independent Federal Reserve, mistaken theories are applied directly to "manage" the economy. These Fed economists believe their own bullshit! We have seen where that got us, and where it's taking us now.

Macroeconomic theory is an utter failure. It has always been this way, and it always will be this way. The IMF can hold conferences from now until Doomsday, but don't expect anything to change.

Remedy du Jour -- March 26, 2011

Very sad today. Angry too—at Life, which is not the unalloyed blessing so many people like to pretend it is.

And it is that pretending—those myths and delusions we maintain in our economic life, in our politics, and in most other human affairs—that makes life suck much more than it would otherwise. But there's no changing it.  For you see, it's psychologically necessary for some that thousands (or millions) should suffer before they will admit their sins, lies, errors, corruption or hypocrisy. Or maybe they lack a conscience altogether. Maybe they just don't care. It makes no difference in the end. The result is always the same.

Thanks to American Rhetoric for the film clips.

 

 

 

 

Saturday Oil Report -- March 26, 2011

Due to a tragedy in the family, this post will be short and bittersweet.
    —Dave

The Nymex oil price for the front month contract sits at $105.50. The speculative episode which I described in my previous report has not ended. Rather, it got fresh legs during the last week despite the tragedy in Japan and the intervention in Libya.

Oil Alarm Level — Orange

We are told there is a "risk" (or "fear") premium in the oil price. We are told speculative (paper) oil or grain trading is an essential part of global energy or food markets. It doesn't matter that higher gasoline prices squeeze American families who have little choice about fuel purchases. (Economists will tell you that the price elasticity of gasoline demand is very low in the short-term.) It doesn't matter that volatile oil prices crimp business decision-making.

No one seems to care that higher food prices in various poor countries is a matter of life and death. It doesn't matter that 40% of America's corn crop goes toward fermenting moonshine to put in your gas tank while people starve in other parts of the world.

I yearn for the good ole' days (pre-2007) when we knew (more or less) what the price of oil was. I yearn for the days when supply & demand drove the price. I yearn for the days when unregulated gambling was not our society's chief economic activity. 

In short, I would prefer to live in a society which has not gone insane.

Watch CBS News' Playing the oil prices money game. Also see my March 11^th post The Oil Price — Everybody Has An Axe To Grind.

Regarding my next report in 2 weeks, I see no reason why the oil price should not be at least as high then as it is now.

Playing God With The Environment

Geoengineering to mitigate global warming is making a comeback according to physorg.com—

Scientists call it "geoengineering," but in plain speak, it means things like this: blasting tons of sulfate particles into the sky to reflect sunlight away from Earth; filling the ocean with iron filings to grow plankton that will suck up carbon; even dimming sunlight with space shades.

Each brings its own set of risks, but in a world fretting about the consequences of global warming, are these ideas whose time has come?

With 2010 tying as the world's warmest year on record and efforts to slow greenhouse gas emissions looking stymied, calls are rising for research into engineering our way out of global warming - everything from launching solar shade spacecraft to genetically engineering green deserts. An international consortium of 12 universities and research institutes recently, for example, announced plans to pioneer large-scale "ocean fertilization" experiments aimed at using the sea to pull more greenhouse gases out of the sky.

Once the domain of scientists' off-hours schemes scrawled on cocktail napkins, such geoengineering is getting a serious look in the political realm...

Source

The eruption of Mount Pinatubo in 1991 gave everybody the idea that we too could play God with the environment.

Geoengineering takes its cue from the natural experiment that actually had made the only dent in global warming's rise in the last two decades - the 1991 eruption of Mount Pinatubo in the Philippines, which blasted more than 15 million tons of sulfur dioxide 21 miles high, straight into the stratosphere. The stratosphere suspended those sulfur particles in the air worldwide, where the haze they created scattered and reflected sunlight away from the Earth and cooled global atmospheric temperatures nearly 0.7 to 0.9 degrees Fahrenheit in 1992 and 1993, before finally washing out, according to NASA Goddard Institute for Space Studies estimates. Firing about half that much sulfur into the stratosphere every year for 30 years would help stabilize global warming's rise, National Center for Atmospheric Research climate scientist Tom Wigley estimated in a much-debated 2006 Science journal report.

Humanity would effectively become addicted to sky-borne sulfates to keep the cooling on track. The tradeoff is that rain and snow patterns would likely shift, a 2008 Proceedings of the National Academy of Sciences study found, consigning hundreds of millions of the poorest people on the planet in Africa and Asia to recurring drought.

In the past, I have derided using some form of geoengineering (graphic above) as an offset to CO₂ emissions, mostly because I believe there is nothing that human beings can not fuck up. Review the recent events in Japan if you need a reminder. Man is not the measure of all things, counter to what some hubristic Greek thought. Nature gets the final say.

The first video presents a short but serious discussion of the problem, including the probable unintended consequences accompanying any kind of geoengineering. The second video argues for geoengineering as another option to mitigate anthropogenic climate change. In both cases, the argument basically goes: we're in a deep hole already, we're in way over our heads, so why don't we just keep digging!

Surely we know at this point that if we go down this road, things will not end well... Then again, things are not going to end well anyway. Why not go for it! If only we could "geoengineer" a few trillion barrels of oil...

 

 

Our Two-Tiered "Recovery"

Tech Ticker's Aaron Task and Henry Blodget interviewed investment consultant Gary Shilling yesterday. Shilling's thesis will not strike readers of DOTE as controversial: the rich are doing just fine—thank you very much!—but the rest of us poor schmucks have been left holding the bag.

Henry points out America's enormous wealth & income inequality, which is (at least) as bad as it was in the late 1920s before the stock market crash and the Great Depression. He then asks Shilling how does this get resolved? In other words, how do we acheive a more equitable distribution of the income which would make America's once great Middle Class viable again. Shilling can't foresee any socioeconomic shift which might bring that about.

This blog is not called Decline of The Empire for nothing. When I explained why American has two economies in The "Economy" — America's Great Lie, I was describing a permanent condition. It's not as if we've had a "recovery" in which wealthy investors in the markets thrive while everyone else languishes. It's not as if we're waiting for the "recovery" to catch up to the rest of us. That's just some trickle-down economics nonsense. In short, that story is propaganda.

Two tiers are built right into the socioeconomic structure of this society. Look at the graph below. What do you see? Do you see

• a slow, painful economic recovery?

Or do you see

• a new socioeconomic reality?

Chart from Mike Shedlock, who says "according to the BLS, non-farm employment is lower than it was 11 years ago!" That big bump up in employment during the aughts was almost entirely due to the Housing Bubble.

The people running this country want you to believe Story #1—the slow, painful recovery will eventually lead to prosperity for all. In fact, it's likely you want to believe this story. But that's utter nonsense—you should know better at this point. America has a large and growing underclass, and if you're not in the top decile (10%) of wage earners, you're in it. Even if you're actually working full-time, it's still a struggle to keep your head above water. This is a permanent feature of the American landscape.

Don't wait for things to improve, or improve much. As I said, this is as good as it gets. If this society creates more lousy part-time service jobs and the unemployment rate goes down, has anything really changed? Bear this in mind every time somebody tells you unemployment claims went down in the previous week.

Here's the Tech Ticker video.

 

The Cost Of Living Just Goes Up And Up

The "official" cost of living rose above its pre-meltdown high last week. CNBC reported the bad news in US Cost of Living Hits Record, Passing Pre-Crisis High.

One would think that after the worst financial crisis since the Great Depression, Americans could at least catch a break for a while with deflationary forces keeping the cost of living relatively low. That’s not the case.

A special index created by the Labor Department to measure the actual cost of living for Americans hit a record high in February, according to data released Thursday, surpassing the old high in July 2008. The Chained Consumer Price Index (C-CPI-U), released along with the more widely-watched CPI, increased 0.5 percent to 127.4, from 126.8 in January. In July 2008, just as the housing crisis was tightening its grip, the Chained Consumer Price Index hit its previous record of 126.9.

The regular CPI, which has already been at a record for a while, increased 0.5 percent, the fastest pace in 1-1/2 years. However, the Fed’s preferred measure, CPI excluding food and energy, increased by just 0.2 percent.

This is a remarkable result, coming as it does from the Bureau of Labor Statistics, the official arbiter of inflation reality. If you consider that the price of oil was well over $120 per barrel through much of the first half of 2008, and is well short of that level now, imagine what the cost of living will be when oil prices finally do reach the stratosphere.

The CNBC article tells us a bit about how the BLS "adjusts" the data so things don't look quite as bad as they really are.

In 2002, the BLS created this often-overlooked cost of living index in order to account for the kinds of substitutions consumers make when times are tough. It is supposed to be even closer to an actual “cost of living” measure than the regular CPI. From the BLS website:

For example, pork and beef are two separate CPI item categories. If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef. The C-CPI-U (Chain Consumer Price Index) is designed to account for this type of consumer substitution between CPI item categories. In this example, the C-CPI-U would rise, but not by as much as an index that was based on fixed purchase patterns.

Well! For those of you who can still afford to buy meat, one wonders what the BLS has decided you might do when pork becomes too expensive. What comes next? Chicken? And after that? Soybeans? Compacted animal turds? I'm sure you find it reassuring that the Labor Department is making happy assumptions about your behavior to keep the "official" cost of living at a manageable level.

Still, with all those theoretical substitutions the Labor Department assumes you are making, the cost of living (C-CPI-U) is at its highest level ever. Although there's little to be done about the rising costs of food and energy, current circumstances present yet another opportunity for the BLS to revise its methodology so things don't look so bad.

Thanks to "counter-cyclical" deficit spending and bold monetary policy, we're not having the Great Depression II. Anyway, that's the official story. Instead, your cost of living just goes up and up, even with underemployment hovering around 20% according to Gallup. All this should come as no surprise. Nothing to see here, folks, move on, move on...

Surely you didn't think those in our Imperial Capital actually give a damn about you, did you?

Bonus Video