My Own Summers vs. Bernanke Rebuttal, With Some Colorful Rants

I have been holding on to this long rant deciding whether to include my substantial rants that are quite out... In the simple desire to move on I decided to just put it all out there... 

This writing is a response to the publicized back and forth between Larry Summers and Ben Bernanke through their respective blogs which I firs read about here:

Summers: The essence of secular stagnation is a chronic excess of saving over investment.  Check

Summers: In situations where target saving is important, reductions in rates may increase rather than decrease saving, exacerbating imbalances.  Check

Summers: I think that it will be hard to escape the conclusion that household debt grew at an unsustainable pace in the decade before the great financial crisis and that this was an important spur to growth.  Check

Mind you Summers, another lifelong academic with no real world experience operating in any industry outside of education (or non-profit “think tanks” that seek to directly influence legislation by hiring high profile and Ivy League academics to “vilify” their agendas), was an Integral Player and heavily influential in the deregulation game.  During his entire tenure with the Treasury, he became Wall Street’s whipping boy. Within less then a decade in the early 2000’s deregulation, which is arguably the core reason for the bubble / unsustainable credit / derivative expansion that ensued, actually picked up steam under advice from people like Larry Summers.  He was instrumental in further influencing a hands off approach towards “managing” the explosive growth in unregulated derivative products built directly on the backs of individual borrowers in the US and elsewhere (wherever “offloading risk” became the core ideology of “lenders” the world over) and not unsurprisingly, after the collapse of credit markets around the world, ended up back at government service in 2008 to make sure no branch of  the government, regulatory or otherwise engaged in ANY reigning in of the “regulated” financial industry nor sought to disband, regulate or otherwise force under regulatory framework the multi-trillion dollar “unregulated financial industry”. 

Summers argues governments can expand debt “indefinitely”:  “As long as a public investment project yields any positive return it will generate enough revenue to service the associated debt.”

Yet Summers completely ignores the exceptional debt burden currently held by nearly all the major industrial economies including China, which though not a fully “developed” industrial economy, is vastly influential in global economic reality due to its sheer population size and explosive government orchestrated “growth” over the past several years.  As Bernanke goes on to retort, this is important as the money printing and excessive spending shows declining rates of return over time.

Summers again on debt spending: The case for expansionary fiscal policy in economies with very low real interest rates is of course magnified if there are reasons to doubt that the central bank can act on its own to raise inflation expectations.  It may well be that in situations where the interest rates are trapped near zero –  such as those prevailing in Japan and Germany – expansionary fiscal policy reduces real rates by raising inflationary expectations.

So do you REALLY want this kind of inflation?  Fiscal spending increases, ie; government spending be it infrastructure or otherwise, is not sustainable long term, esp. if the government already carries very high debt burden.  So ramping up inflation via monetary and fiscal policies with NO resulting increases in private investment in the economy will create the worse kind of inflation, not unlike that currently happening in Brazil.  So Really?  Do you want the kind of inflation by printing money and government spending with no private investment and or increases in productivity?  You are in for a real mess… So someone here needs to explain the different types of inflation and what kind of inflation is or would be considered “normal” or “desirable” vs. inflation for the sake of inflation!!!!

Summers back to “secular stagnation”:

Indeed, the lower level of rates, the greater tendency towards deflation, and inferior output performance in Europe and Japan suggests that the spectre of secular stagnation is greater for them than for the United States. 

Now, any person with some understanding of the economic reality of Europe and Japan vs. the US would be able to understand right away why the “spectre of secular stagnation” is greater in the former.  Demographics, labor market flexibility, immigration dynamics, capital flows (real and financial) and competitive markets all greatly differ in the US vs. Japan/Europe.  It simply does not matter how much money they print in Japan or Europe, this money will not solve problems that are / were not based on money in the first place.  Devaluing their currencies against the Dollar has run it’s course and China is about to go through a major currency adjustment as they get killed by their indirect dollar peg which in the end, with Brazil, Russia and several other mid-tier industrial producers all trying the same game will result in nothing more then an across the board debasement of currencies everywhere in a race to the bottom NOBODY has a clue where or how it will end.

Summers pointless statement: Global mechanisms that concentrate on causing borrowing countries to adjust without seeking to shrink the surplus of surplus countries will tend to push the global economy towards contraction. 

This statement is straight from the mouth of an Academic for sure.  What on EARTH are you going to do to “shrink the surplus of surplus countries”?  Tell them to spend money?  The ONE THING that is in the process of happening, China’s lead on creating the Asian Infrastructure Investment Bank (Remember the US was a the only major nation with an undestroyed economy and a major creditor back when the IMF and World Bank were created and virtually dominated by the US from their inception, even though the US is no longer a major creditor nation), leads to headlines like this one from the Guardian:  “China's growing support to lead multilateral lending bank worries US”.  Why doesn’t Mr. Summers recognize directly how important it is for the nations around the world that have built up massive foreign reserves through “excess savings” start putting this money to use around the world instead of having Washington look like it’s being run by the complete idiots it is!!!

Summers does recognize the futile exchange rate policies: Policies that seek to stimulate demand through exchange rate changes are a zero-sum game, as demand gained in one place will be lost in another.  Secular stagnation and excess foreign saving are best seen alternative ways of describing the same phenomenon.

Yet Summers only uses the “demand” argument here, failing to estimate the various other negative repercussions of competitive exchange rate reductions.  Calling every country’s attempt to debases it’s currency so it can “export” it’s way out of economic malaise (thinking increased exports will lead to further investment) while at the same time boosting inflation with the intent of devaluing their current debt burdens, a “zero sum game” is being VERY generous to what is likely to be a global economic disaster!

Summers Final lack of solution: So, I continue to urge that it is worth taking seriously the possibility that we face a chronic problem of an excess of desired saving relative to investment.  If this is the case, monetary policy will not be able to normalize, there will be a continuing need for expanded public and private investment, and there will be a need for global coordination to assure an adequate level of demand and its appropriate distribution. 

This is Summer’s final academic statement that just blows me away!  “Chronic excess saving” is hilarious thought.  Watching corporate America take huge amounts of their “earnings and cash flows” and plow that money into buying back their stock instead of investing it is heartening.  This is a major transfer of wealth, the money spent on buying products generating ever larger profits as the oligopolization of the American economy continues to increase prices (under the radar as the official inflation numbers are massively distorted, go buy a gallon of paint and tell me why it is $30 vs. $10 fifteen years ago…) and profits are simply used to buy back stock which gets plowed back into the stock market.  Meanwhile, nearly free money exacerbates this problem as central banks mop up a huge chunk of government issued debt leaving “investors” looking anywhere for yield.  Companies not only use their current cash flows to buy back stock, but literally leverage their companies by borrowing ever increasing amounts of nearly free money to buy back their stock at elevated prices.  While great for the upper echelons of corporate management who get ever richer by cashing in on their stock options pocketing billions of dollars a year in personal “profit”, the average “saver” gets zero return on their money, resulting in the fact that they are actually saving MORE to counter the loss in earnings they would have from interest. 

In a “perfect” economy, based on pure economic theory, people would be spending all their money today as they get NOTHING from saving it.  But economic theory be-dammed, because in reality, the aging populations of the developed world have been saving MORE since they are playing a loosing game against the push by central banks to increase inflation while their cash savings yield them zero return nominal return.  Now tell me, supposedly “savers” participate in investing when the institution with which they place their “savings” lends it out and at positive rates and pays them interest earnings for using their money.  But this rationale is completely broken, it simply does not happen any longer!! The banks just keep all the profits, including the profits from their 15% credit cards, fee generating income, investment banking, mortgage lending etc.  Want a yield, you better to buy their stock and hope they don’t go belly up or another financial crisis does not wipe out your investment.  Then there are always the crowdcube.com models where you can invest directly in small businesses with your own money. 

The thinking goes, in a zero rate environment corporate entities would be happy to borrow and invest in nearly anything able to earn return higher then ZERO.  Well, the financial industry is taking the trillions of newly “created” money and buying nearly anything with positive yield with abandon, meaning lots of worthless paper can float around at exceptionally low yields right now.  Yet, the average Joe does not participate directly in this game as his “investment holdings” are more than likely tied up in some retirement account where he has no idea how much of it is chasing yields in a new debt bubble that is likely to burst taking whatever he managed not to loose or regain since the last financial collapse and wiping it out again along with whatever he contributed since then. 

Where is the investment?  Why invest?  The developed world has nearly zero population growth and a massively aging bulge in their population while the rest of the world, where populations are rising rapidly, people are still poor, their countries still lack industrial capacity, infrastructure investment, technology and or any of the other factors needed to participate in “development” while most of them are still having their natural resources stolen from them for pennies on the dollar with no secondary industry even in existence to turn these recourses into finished goods at higher value and thus raise the incomes of their populations.   Where are Summers tangible recommendations on how to remedy this situation? 

Screw trying to force feed investment in mature economies where underlying demographics and consumption trends are declining!  How does the world get growth, investment, consumption and inclusion into the global economic machine in the 3/5 of the population of the world that has been left to rot?  Where are the models that state explicitly that the global economic “norm” that we have lived under for to long is broken?  The planet is at its wits end ecologically and economically.  Growth and Consumption models are broken. Corruption rules far too great a number of the planet’s population (inclusive of many “developed” nations). The global elite are increasing their hold on resources while directing puppet governments they control to abandon their responsibilities to their citizens and spend great amounts of resources and lives on militaries to protect them and move forward their agenda, which has absolutely no productive value.  Most of the war currently happening is a direct result of policies of the developed world which supported corrupt governments for political purposes, exploited their resources, oversaw almost no productive investment purposefully so they could force feed their global brands and products down the throats of the increasingly impoverished people while exploiting their corrupted neo-colonial governments.  You want investment?  You want growth?  You want a return to a “market based” economy where supply and demand work without massive intervention by the wheels of central banks with their capacity to “print” massive amounts of money in the name of “stimulus”?  Then the developed world needs to STOP trying to instigate growth where it is not organically present!!  The developed world needs to start the process of sharing / transporting / instigating development in the underdeveloped world.  Of all nations, China is taking a lead with the new AIIB and this is a good step in that direction.  China, a nation who’s “growth” has been completely orchestrated not unlike the communist / socialist governments rapid growth after WWII; State led, state driven and state directed with spectacular results for a short period, extended of course by China also taking over near a quarter of the global dirty manufacturing with disastrous ecological and environmental results (But that is just fine for an expendable few hundred million people so the developed world elites can have their huge profit margins and their citizens cheap junk to feel rich right?).

Meanwhile, it’s time to the stagnant developed nations’ corrupt governments start recognizing that the “profits” made from corporations either are put to good use or confiscated for the public good i.e.; to pay off the massive debts the irresponsible corrupt governments have accumulated while creating policies to ensure social stability, security and equal deliverance of government services and investment.  The debts government have accumulated, especially since the global financial failure, is directly on the backs of the citizens who are on the hook for trillions after bailing out the financial elites while for the most part the “productive” corporate entities also had a free ride, many having been bailed out themselves!  It’s time this all gets restructured NOW. 

Recognize people that excessive profits, i.e.; profits that are not put to good use, invested etc, are nothing more than a “tax” on the citizens who purchase those products with which the public is NOT seeing any social benefit or “welfare” as economists like to say.  Will you hear Summers or Bernanke say out loud that the models are broken?  That we need a massive rethink of what it means to allow unfettered consolidation and profits from fewer and fewer players who are enjoying massive rewards on the backs of the vast majority of citizens who are NOT seeing the benefits spelled out by so many economists in their pretty little models of how society will benefit over time as capital increases productivity allowing workers higher wages and more leisure etc…

If we don’t do something now or very soon, trust me, there will be backlashes from society and elements of society who will propose far more drastic measures and far more destructive proposals in the future if the current “institutions” on all sides of the debate don’t start coming up with tangible solutions now!!  (I would argue this is at the core of most global conflict since at least 2001.)

I would propose a global developed world corporate tax rate that is collectively agreed upon, that no nation is able to undercut and that completely eliminates the incentive for corporate entities to skirt their responsibility to pay taxes on the profits they make.  It should be a crime for any corporate entity to use gimmicks and supply chain accounting to hide, transfer or otherwise manipulate their profits to avoid paying tax in any given jurisdiction.  Corporate entities should be made to realize they operate via corporate charters that are granted by legal entities in jurisdictions they operate and that part of their allowance to do business and answer to shareholders and the like is an understanding that they have a social obligation to operate their business ethically, pay wages directed by law, pay tax on their profits and understand that the responsibility of the governments they operate under are not free, that caring for the social welfare of the population and investing in the infrastructure that benefits both the corporate entity, their workers and the people they “serve” are all connected.  To act in any way that is contrary to the good of the citizenry where they operate is criminal activity and they risk loosing their corporate charter to operate.  This is to be a rebalancing of the responsibility of corporate entities who operate with the blessing of the state / citizens of the world they operate in with the needs of the citizens governments to finance the social welfare of those citizens.

I would criminalize extraction exploitation on a global scale.  Institute a minimum royalty for all resource extraction including agriculture that would be to the benefit citizens of the nation where the extraction is taking place.  In addition, global environmental / ecological rules would be enforced on any an all companies operating in the extraction industry.  Global resource accounting would identify in real time all resources that exist and international agencies would work proactively with local governments to manage the proper extraction of resources, helping to set up local legal structures and monitoring systems to make sure compliance is universal.

I would set up a global database of every hectare of arable land on the planet and begin working with every government on the planet to establish best use guidelines and practices for the land, encourage the application of agricultural technologies suitable for each region, outlaw the use of any genetically altered seed or product that involves the use of mass pesticides and instead focus on local varieties of  agricultural production that takes advantage of that regions soil, environment, available technology and resources. For the McDonalds or the world that rely on homogenized agricultural products on a global scale, this would be allowed no longer.  Diversity in Agricultural output would be the rule and global homogenization of global food sources no longer encouraged or allowed to be dictated by any one or group of corporate entities for the benefit of their “business model”. 

I would create a global arable land database, inclusive of potential for fisheries and livestock, for every nation / common geographic area taking in consideration of the population of every nation and use all resources available from international agencies to plan and coordinate a strategy to make sure every person on the planet has access to a minimum daily calorie / nutritional allowance of food, with all priorities directed toward efficient local production vs. cheap developed nation subsidized products undercutting the local market’s production.  In this effort, food would be sourced locally as possible, with strategies to manage the import / growth of food sources, emphasis on accomplishing the daily nutritional needs, focus on plant based nutrition vs. animal nutrition and vast application of the best known irrigation / organic fertilization / farming techniques known and applicable for the specific region.  The effort would be coordinated with local governments and composed entirely of local citizens who would be trained, financed and supplied with all the necessary inputs needed to successfully operate i.e.; technology transfer and technological expertise on the ground.  Ideas like the patenting of seed that is not recyclable through the use of seed from the crop grown would be strictly outlawed and everything possible would be done to ensure continued success of all initiatives to meet global nutritional standards.  This initiative would include developed nations where for all intensive purposes, the food abundance and massive waste of the “food industry” that takes place in the developed economies (not to mention the massive “throw away” of food by individual citizens) would be accounted for either financially or otherwise and direct fines would be imposed as a financial penalty that would be used to finance agricultural and nutritional needs in deprived parts of the world.

Every vehicle sold for “personal use” that does not meet a pre-set qualified global standard of emissions, fuel economy, recyclability etc. would be subject to a direct and immediate “tax” that would be used to dramatically expand renewable, non-fossil fuel energy the world over.  This “tax” would also apply to the construction of housing, commercial facilities and be imposed on corporate entities in the business of physical productive activities who do not meet a global environmental standard.  The era of cheap disposable products would be declared OVER.  Every durable good must be repairable, recyclable and meet minimum life cycle requirements, period. 

Every vehicle transportation system in the world would be reworked.  There would no longer be millions of miles of roads that allow any two vehicles to travel at high rates of speed towards each other in opposite directions with nothing but a painted line between them.  The idea that a supposed intelligent race of beings would allow such a thing to happen is bazaar and obscure. To continue to propagate such ignorance is beyond comprehension.  It should have been reconsidered the moment a motorized vehicle came into the hands of a citizen for common use.

There are additional global initiatives I would begin working on and will embellish on later…

Now on to Bernanke’s remarks:

Bernanke Comment on Summers Solution: Larry’s proposed solution to this dilemma is to turn to fiscal policy—specifically, to rely on public infrastructure spending to achieve full employment. I agree that increased infrastructure spending would be a good thing in today’s economy. But if we are really in a regime of persistent stagnation, more fiscal spending might not be an entirely satisfactory long-term response either, because the government’s debt is already very large by historical standards and because public investment too will eventually exhibit diminishing returns.

Well Bernanke puts this well enough.  Now where are the alternative solutions?

Bernanke Learning MIT: As Larry’s uncle Paul Samuelson taught me in graduate school at MIT, if the real interest rate were expected to be negative indefinitely, almost any investment is profitable. For example, at a negative (or even zero) interest rate, it would pay to level the Rocky Mountains to save even the small amount of fuel expended by trains and cars that currently must climb steep grades.

Of course this is true when and if it is expected the investment you make is going to have some utility!!  Hello! The word “almost” is a VERY big word here.  Just because the government could borrow at zero percent vs. say two percent does not clear return on investment make! 

So why is investment at historically low rates?  Clearly, companies operating at the duopoly or oligopoly level, the majority of sectors in the American economy, see the reality.  They are already making or importing products on such a large scale at such a low cost and selling it at increasingly profitable prices, that there is little left for them to do to sell more, thus they just buy back their stock with their earnings (there are plenty of economic models for this phenomena).  Since the collapse of the oil price, not even high energy prices are encouraging them to invest in say plant or energy efficiency right now…  Outside of the technology area, where very low levels of “physical” investment can result in very high valuations and profit margins, and large scale production industries such as Aerospace and Automobiles and for a while areas like oil drilling, shipbuilding and mining, investment is on the decline.

Not enough of the general population have come to realize how much damn money the companies are making selling nearly everything to them at increasingly high developed world prices while their cost of production lies in the underdeveloped world (one of a few emerging exceptions is beer, thank God).  Once people figure out how cheap machine tools are (thank you Alibaba), and how much money they could make producing and selling everything from underwear to peanut butter to house wears without going through the oligopoly retail industry, more people may start investing and producing.  There are already cottage industries all over the US making and selling everything from organic and gourmet foods like ice cream, chocolate and other delectabl's to soap, lotions and other consumables. These people are investing, producing and in some cases growing and building sustainable businesses.  They figured it out.  Perhaps they will make higher quality products and sell for a premium and perhaps their consumers will spend more on quality and less on quantity and this shift will create tens of thousands of cottage industry producers of high quality goods sold directly to consumers who will be happy knowing that consumption of quantity vs. quality was futile and wasteful and degrading to the environment… Who knows?  But it is worth governments putting money and resources behind this initiative.  Education, training, cooperative business starting rules and regulations, flexible labor laws and tax incentives are all worth while.  This might sound pie in the sky like but the potential is there and is happening and has happened on some levels already.  In addition, these cottage industries are “making a living” i.e.; beating the “ wage trap” created by corporate America that limits one’s earn-able income, where lacking a secondary education, being unable to pass the on-line corporate drone psychology test, or being one of the 65 million Americans with an arrest record, means attaining a decent salary is becoming a remote reality. 

Bernanke Note on equilibrium negative real interest rates: I concede that there are some counterarguments to this point; for example, because of credit risk or uncertainty, firms and households may have to pay positive interest rates to borrow even if the real return to safe assets is negative. Also, Eggertson andMehrotra (2014) offers a model for how credit constraints can lead to persistent negative returns. Whether these counterarguments are quantitatively plausible remains to be seen.

Bernanke on bubble instigated full employment: They note that the bubble in tech stocks came very late in the boom of the 1990s, and they provide estimates to show that the positive effects of the housing bubble of the 2000’s on consumer demand were largely offset by other special factors, including the negative effects of the sharp increase in world oil prices and the drain on demand created by a trade deficit equal to 6 percent of US output.

It’s a crazy idea that only at the end of a cycle do we have a “bubble” hence the cycle is not a “bubble” cycle… Let’s just say that with any idiot with no formal economic education could see the severity of cycles in the economy over the last 30 years or so were all financial in nature, driven by Wall Street gamblers and speculators, and all involved bubbles in various sectors of the economy.  The latter part of the 1980’s, 1990’s and 2000’s were all cycles that at the end of each, resulted in massive transfers of wealth to the top, exaggerated more intensely each time, with each cycle involving ever increasing amounts of debt held by both households and industry (and government with the exception of the late 1990’s balanced budget on the Federal level, a gift horse for an aging nation that was quickly squashed by the reckless and mindless policies of the Bush presidency) and ever more drastic measures taken by the central banks to “smooth” over the excess without allowing or forcing structural change.  In fact  more effective regulation, resulting in ever larger bubbles and collapses.

The time has long since come for the trillions of dollars in unregulated financial capital sloshing around the world looking for “yield” to be reined in, shut down, regulated and or completely disbanded and forced into productive use.  The money being printed by the central banks is pointless.  There is plenty of money, it is all highly levered into “financial instruments”, being recycled through the revolving buybacks and subsequent stock purchases and being used to gamble and speculate. The Trillions of “wealth” tied up in pointless paper and derivatives instead of being put to productive use is at the core of the lack of investment on a global scale.  Using money to make money without ever producing anything tangible never ends well. 

What the central banks did during and after the credit crises and continue to do today will be marked as the biggest mistake in human history.  The global credit “reset” had started back in 2007-09.  This was badly needed.  The ONLY money central banks should have printed was that which was lost through the insolvency of nearly all major banks by actual individuals and companies who had stored money in insured bank accounts.  The bailing out of money markets, which nearly all had been so mismanaged they were essentially on their way to offering an unprecedented “haircut” of several percentage points or even more to the individuals and institutions who kept trillions of dollars stored there was a huge mistake.  Recapitalizing insolvent overly levered banking conglomerates was a huge mistake.  Handing trillions of dollars to bank and non-bank institutions with explicit instructions to provide liquidity to the multi-trillion dollar unregulated hedge fund and private equity markets was a huge mistake. Allowing dozens of insolvent non-bank financial companies, from credit card issuers, to Wall Street institutions to commercial and individual credit companies to become bank holding companies to give them access to Fed funds was a huge mistake.  All the Central Banks have accomplished, is to allow trillions of dollars in levered “financial paper products” to remain in circulation, then allow the debt bubble to inflate even further along with the derivative markets.  Printing ever more money is only aiding and abetting the continued accumulation of non-productive leverage for no good reason! 

As of this writing the amount of outstanding bond debt of American Corporations has literally doubled since 2008 making total corporate debt now nearly 80% of US GDP, the value of non-revolving debt held by Americans has gone up by over 2/3rds, the approximate value of financial derivative products has grown by at least 1/3^rd bring the total global exposure to over $700 trillion! Meanwhile the debt burden assumed by the non-presumptive citizen pawns through their irresponsible governments as they protect the “wealth” of the elites has grown exponentially as well (8 trillion or up 80% from 10 to 18 trillion in the US alone). 

It is 2015 and the global financial system functions more like the 19^th century from the perspective of capitalistic games between gambling men who wield their financial power from the small financial centers of the world, where nobody is held accountable, money floats around with no national allegiances or responsibility to any citizens on the planet and where humanity is just considered fodder for making as much money as possible.  Crash a currency, sure, inflate a commodity, sure, crash a commodity, sure, flood a market with short term cash, sure, suck the cash out overnight, sure, it simply does not matter what destruction these actions wrath on humanity as long as the global elites make their desired 8-10-15-20-25-30% or whatever they can on the backs of whoever they can for whatever reason. God forbid any nationality try to tax them for what they do! Meanwhile “economists” sit around trying to recreate economic models by studying the behavior of people in villages in remote areas of Thailand.  Yea, a whole lot of good this does the global economic system! 

Bernanke Academic statement is not worth salt. He says, “The foreign exchange value of the dollar is one channel through which this could work: If US households and firms invest abroad; the resulting outflows of financial capital would be expected to weaken the dollar, which in turn would promote US exports.”  What a load of academic hogwash.  Is he aware that the entire global financial system is currently rigged?  To go back to some academic economic model that assumes a “normal” functioning economic system, where the “exchange value” or the dollar would be affected by his suggested actions is INSANE.  He is talking out of the side of his mouth! The EU and Japan are both highly manipulating their exchange rates through massive monetary policies.  Does he really think “US households” are capable of anything other then borrowing as much money as humanly possible at very low rates and consuming as much as possible now?  This is exactly what the central banks are encouraging!! They are not encouraging “saving and investing”!! Besides, for the last 30 years or so, all US firms have done is invest abroad!  They have built or shipped wholesale factories and production “abroad”.  They have expanded their operations, purchased companies, transferred their monopoly rents, outsourced massive amounts of their production (Boeing anyone?), moved wholesale their customer service operations… basically every possible way under the sun American companies have “invested abroad”, many times to the detriment of the local economy (telecom companies buying assets around the world with their monopoly rents while the biggest thing to ever hit the telecom world grew like mushrooms in their back yards in the 1990’s, hello!). And what is happening to the dollar?  Does this man even know that the dollar is a “reserve currency” where it really does not matter what the US Fed reserve thinks it can do to “manage” the economy.  The reality is there is no measurable amount of fiat currency that can be printed to bail out the global debt bomb that burst for a minute in 2008/9 and will burst again imminently.  There are almost no policies that can be “initiated” that will have predictable effects on exchange rates / investment / consumption etc. when every “developed” nation’s central bank is pursuing the same reckless debt expansionary policies.  Just forget about it!

And this is Bernanke’s hilarious example: “For intuition about the link between foreign investment and exports, think of the simple case in which the foreign investment takes the form of exporting, piece by piece, a domestically produced factory for assembly abroad. In that simple case, the foreign investment and the exports are equal and simultaneous.” 

(WTF?  If exported our factories as “investment abroad” what good would it be to have a lower exchange rate?  We would not be producing anything any more to make the lower exchange rate work for the good of the economy!!  We would be importing finished products made in foreign countries with the factory we exported to be purchased by people making a dwindling amount of money from shitty retail wages. Sound familiar?  Where do these guys get their common sense?). 

Irrespective of whether the company is a US company or not (think Apple making $600 phones overseas and importing them to the US instead of making them here, keeping both the profits and production out of the US) we have been gutting our economy for decades while at the same time exporting our technological know-how (and even our lower productive factory machinery as Bernanke suggests) and now every nation in the world is “exporting” everything back to the US, which is just churning the same money over and over, bubble to bubble, debt to debt, to buy the products with ever dwindling amounts of income allocated to the largest historically economically strong segments of the economy while each churn turns over another huge chunk of that pie to the richest 10% who are in the position to benefit from the debt/churn machine.  I truly love when academics set up “examples” that expose how clueless they are to what they are saying or how inappropriate their examples are.

Notes:

1)      How many more people would care to drive through the Rocky Mountains if they were leveled for a road through?  Would there be any increase in productivity from the mountain pass?  Would the savings on fuel actually lead to any social benefit that is measurable or would it just leave a little more money for the person driving to be able to buy a hot dog and coffee on the way?  How would the government ever see a return on such expenditure?  Would the expenditure’s short term multiplier effect have any lasting benefit?

2)      per year: 35,000 average shares exercised, 7425 exercises, $24.88 average profit/share 1996-2003

• On a Side Note:

From article:

Time preference reflects the relative valuation placed on goods at an earlier date versus a later date. While current goods (including cash) should always have a higher valuation than future goods, time preference declines as an economy becomes wealthier, i.e. the proportion of income devoted to current consumption falls versus that devoted to saving/capital accumulation.

On one hand, their policies seek to increase current consumption, at the expense of long-term saving & capital accumulation, in an over-leveraged world. This increases time preference and would normally equate with higher interest rates, shortening time horizons and diminution in wealth.

However, by forcing down interest rates, the substitution of savings (real wealth) by cheap credit and by supporting financial markets, they have created an impression that time preference is lower than it really is. This lengthens time horizons, implies that current/rising consumption levels are more easily sustainable and induces incorrect spending decisions. (Basically creating a “new normal” in expectations)

Do the Central Banks want Inflation? Maybe Brazil can bottle it up and sell it to them!!

A hilarious article on Marketwatch  quotes some Wells Fargo “senior economist” named Bill Adams saying, “Brazil’s expansionary monetary and fiscal policy in the aftermath of the global recession caused it to lose policy credibility, and that’s why Brazil has high interest rates and high inflation today”.  The article also notes:

“As the financial crisis rippled through global financial markets, the Central Bank of Brazil slashed its benchmark short-term SELIC rate from 13.75 in December 2008 to 8.75 by July 2009. Lower rates produced a surge in wage growth, which pushed prices higher. But as wage growth has slowed, prices have continued to rise, compounded by the depreciation of the real.

The Central Bank of Brazil said Thursday that it expects inflation to hit 7.9% in 2015, while it expects economic growth to contract by 0.5%.” 

Besides the fact that this typical economist simply fails to fill in the reality on the ground in Brazil, where for over a decade their economy enjoyed growth and praise as one of the pillars and models of growth for the 21^st century, absorbed huge amounts of investment from outside investors,  was a key member of the so called BRIC countries that experienced a boom in growth partially thanks to the global commodity price surge (indirectly from the Chinese pumped up government orchestrated “growth” model) along with billions in controversial stimulus spending after the credit crises related to preparing for the 2014 World Cup, which essentially completes the "dream scenario" talked about by economist, he is a complete Hypocrite!!

The shallow tone of the article and shallower coverage of reality on the ground in Brazil can only cause one to be cynical about these so called economists views when at the same time Brazil is being criticized for their monetary policies EVERY “developed” economy in the world has their central banks printing trillions of “dollars” while doing everything in their power to keep interest rates at virtually zero without loosing credibility!?!  Yet when Brazil attempts the SAME policies, they are quoted as “loosing credibility”?    Yea, global imperialism is still alive and well and if you don’t have a “reserve currency” you are still F%&#@d in the world of global capitalism.

Stephen Roach Should Know Better, so should US policymakers...

I just read this paragraph inside of this article about China’s growth and challenges:

“The best way to measure how far China still has to go is to consider the development of its services sector — the infrastructure of consumer demand in an economy. The good news is that services are now growing faster than any other sector, having reached 48% of gross domestic product in 2014 (thus surpassing the end-2015 target of 47% well ahead of schedule). The tough news is that this remains significantly lower than the 60% to 65% share typical of a more “normal” economy.”

This is from Stephen Roach, a senior economist for some 30 years at Morgan Stanley Asia. Now to make a statement like this about a nation with as many people STILL living on $2.00 a day as there is in the entire population of the US is almost unconscionable and shows the level of disconnect between those who are supposed to know what is going on in places like China and those who actually know what is going on in places like China.

Really! Just because China has gone through a massive transition of manufacturing something like 25% of the global goods output followed and coincided with/by the largest government led “development” of everything from housing to roads to rail, power, telecom etc., all inside of one generation, does NOT in any stretch of the imagination mean “senior economists” anywhere in the world should start to compare China with mature developed economies that have been built over 4 times that long!! Yet there it is, in Black and White from someone who should know better.
Fair enough, there is mention of “at least another decade” to “complete” structural adjustment, but I would say a fair number in this category is 25 years+ to accomplish anything near what is insinuated in this article as “complete”.

In addition, the article goes on about America’s paranoia about China and the “Cold War” mentality in dealing with the “rise” of China. Yea, America will bury itself “worrying” about something that is complete nonsense. China is as fragile as any nation in history right now and all the US is doing is playing a card that supports massive additional deficit spending on pointless weapons production and support of the Military Industrial Complex. Nothing good will or can come of this ignorant policy mentality.

Meanwhile, you give me ONE example in history of a country that developed as rapidly as China has in the last 30 years with anywhere near the population they have managed to do this with. Then give me ONE example of any nation that comes anywhere close to comparison and tell me if some 60% of the wealthiest people in that nation have hedged their bets by transferring literally Billions of Dollars out of the country, buying foreign property, secondary visas, and sending their children out of the nation in mass at the same time!! Go ahead, show me! Then tell me what a “threat” China is anywhere in the world!

More and More Wealthy Chinese Want to Emigrate Percentages of Rich People Who Leave the Country: Source

The Day The Economy Died...

I was reading today an article on the proposed merger of Sysco and US Foods (currently owned by private equity groups KKR & Co. LP and Clayton Dubilier & Rice LLC.) about the FTC's opposition to the merger.  Hurray for the FTC!  Well really is there any question in anybody's mind in the US who is a restaurant owner that this should not happen?  Really?

The plain fact is, the chains that have built a considerable business serving Americans low grade industrial food via corporate restaurant "brands" have been the biggest cheerleaders of having national distributors to serve their hundreds or thousands of restaurants nationally.  The lazy MBA's they hire and the corporate managers who hire them have only the lowest cost corporate structure and highest profit in mind when making decisions like buying food for their restaurants.  They like nothing more then to deal with one source for all their food needs.  The national restaurant chains buy large volumes from Sysco, have standardized menus (often items on the menu are actually "created" by Sysco to meet certain cost/price thresholds and certain theme/ethnic branding needs based on available ingredients and cost factors out there) and are able to wield some influence over pricing. Given their size, they can negotiate with the national food wholesalers and even hedge against food costs if necessary.  Essentially the dominance of national food chains and the habit of fat America not to cook any longer but to eat out has over time created these mega distributors and essentially put everyone else out of business.

However, there are still thousands of "non-corporate" restaurant chains who have absolutely NO barganing power against these distribution behomeths and are faced with a scereno like this: It's Tuesday. Sysco arrives at about 10:00 am Tuesday and Friday, portable order tablet in hand quoting the latest "prices" for your food needs.  "Oh, Tomatoes are up 12% from last Friday?" you ask why, Salesperson answers, "Yea, we had price hikes in X, Y, Z of over 10% and A, B, C of 15% due to the 'blizzard, storm, flood, drought, port delay, latest bug infestation yada yada' so these are the prices today, what will you buy?"  Total BS and you know what, unless that restaurant owner happens to have a true independent restaurant supply wholesale ware house or another batch of independent suppliers he can check prices with on a regular basis, then he just has to eat the Sysco price and deal with it.

Oh, so what happened to all the other thousands of local supply companies that used to exist?  They went the same way as the "markets" that used to exist.  All food chain supply in the US is controlled by national grocery chains, national distributors and national franchise wholesalers. Even regional supply chains have disappeared.  The oligopoly economy is rapidly moving to a monopoly economy (which though not controlling 100% of the market everywhere, the Sysco / US Food merger would still enjoy monopoly privilege over price setting and other variables if allowed to happen along with controlling 75%+ of the market over much of the US) which basically means, well, who cares any more?  I mean What's the difference?

America you have the "Office Supply Store", the "Construction Supply Store", the "Food Store", the "Buy all your other imported plastic junk here Store" and soon "get your home plumbing, HVAC etc. here" service...

It is so funny to hear Conservative politicians in the US spout about the more liberal party members and the current president being "socialist" when in fact the conservative side, in their support of ever larger corporate entities, national oligopolies and the like are the ones actually "creating" socialism.  There is nothing more socialist then 3 or fewer companies controlling the sale and distribution of nearly everything America buys (Thank God for Independent Brewery's!).  Just get on the phone and try to contact a real person in some of these behemoths, it's like calling the Kremlin!  Oh, well, actually we are becoming the Kremlin, a nation of oligarchs running the show while everyone else lives like, as Putin himself put it, "serfs". And the US government?  A big fat drain on what "wealth" may have been left in the hands of it's citizens to the Defense Department and for Profit Health Industry.

So kudos to the FTC for overseeing the VERY END DAYS of a dynamic economy in America.  The last wave of mergers will be the last wave cause there is almost no consolidation left to happen... All that's left is Monopoly.  Unfortunately, corporate America is not only consolidating like mad, but doing everything they can to avoid paying their fair share of taxes, essentially gutting the government (hence the influence of the public under constitutional law), while raking in ever larger "profits", often left overseas, which under an oligopoly and monopoly economy may be redefined as "tax" since it increasingly sucks the welfare out of the consumer in favor of the corporation operating in a high price environment without fair competition leaving the citizen with no choice but to pay.

NOTE: The comical thing about the habits of corporate America are when doing business in other parts of the world, even though the corporate entities do everything to avoid paying fair taxes, as soon as they are hit by some cartel or other "unfair" practice in other lands, they try to use the "taxpayer funded" and "constitutionally backed" US legal system to seek justice.  But as Motorola recently found out, TOUGH LUCK cause you can't come home and cry to Mama Liberty when you get screwed by the big boys who operate in kleptocracies with no legitimate legal system or constitutional protections they can turn to when they get screwed!!

Printing Money Against all Economic Logic: Japan

I spend to much time trying to figure out why supposedly smart people at central banks around the world are unable to grasp any semblance of “reality” when it comes to monetary policy and a seeming lack of understanding of what humanity really needs to “save capitalism” before a global backlash threatens the best system we have collectively come up with to sustain life as we know it today.  Japan is the most wondrous example of the “me to” policies perpetuated by major central banks around the world irrespective of the reality on the ground.  See some graphics below.

This is what happens when you print money against all economic logic, when interest rates were already at historic lows but your demographics are working against you.  Where does the money go?  Speculation, Yes!  Investment? Consumption? No.

 Demographics can’t be ignored:

With the extremely low interest rates, aging population, declining workforce participation and practically zero interest rates, saving rates have turned negative as of December 2014…

Savers in Europe face the same dilemma, also with aging populations and zero return on savings, the elderly are just getting poorer, and when they are the largest segment of the population, where is all the money printing going to go?

Neither can economic reality of this effect when looking at Japan vs Rest of World GDP

So where has all the debt spending been going? Where are the growth numbers?  Most importantly, where would Japan be without all this debt spending / money printing? Once again… you can see where the money goes below. 

But unfortunately for the Japanese population, they are not participating in this “faux wealth creation” as shown by the low percentage of stocks held by individuals:

 As this article from the Future Tense blog illustrates:

Until late 2012, the Japanese stock and real estate markets experienced 23 years of declines. Imagine stocks and real estate peaking this year in the United States and declining for the next 23 years. What percentage of their assets would Americans hold in stocks and real estate in 2037? Probably close to 0%. Just like the Japanese today.

The sad part of this story is just as the Japanese have put their entire life savings into cash, the Bank of Japan (their central bank) has declared war on those savings. Most of their citizens will see the purchasing power of their savings decimated in the years ahead. The Bank of Japan has promised to unleash an unlimited amount of QE (and have kept their promise so far) until inflation reaches 2% and beyond.

And what of the earnings at Japan’s largest corporations doing business around the world?  With the above demographics, Japanese nationals are getting poorer by the month as they frantically try to keep their cash savings from declining instead of spending it, resulting in lackluster spending at home. So it’s clear what the corporate sector is doing with their earnings.  As stated in Bloomberg article, they are holding it or investing abroad:

Private companies’ cash and deposits rose 5.8 percent from a year before, to 225 trillion yen ($2.4 trillion) -- an amount in excess of the size of Italy’s economy or the liquid assets held by American firms, Bank of Japan data showed in Tokyo. Businesses held 55 trillion yen in direct investment abroad.

The report underscores the appetite for manufacturers to ramp up operations in faster-growing economies as they await evidence for Abe’s growth agenda opening new opportunities at home.

“The corporate sector is not going to take that money and suddenly start investing, start increasing wages or hiring more workers if it doesn’t see a more optimistic future.”

It’s going to be a VERY LONG wait.

Global Censorship

I may have already written somewhere in this blog about the censorship that America faces in the world of International Media Conglomerates dominating what "entertainment" we see every day.  But I will say it again.  First from Mr. President Obama:

“We cannot have a society in which some dictator someplace can start imposing censorship here in the United States, because if somebody is able to intimidate folks out of releasing a satirical movie, imagine what they start doing when they see a documentary they don’t like, or news reports they don’t like,” Mr. Obama said.

Well, thank you Mr. Obama, Sony Entertainment (Japan), AMC Entertainment (Wang Jianlin company), Regal Entertainment. (Anschutz company), Cinemark and Carmike etc. (the oligopoly group), and all of you dweeb executives looking after your bottom line.  For ANYBODY out there who does not already know how heavy censorship is already in the US, this is your wake up call.


I have the benefit of living in East Asia just now and I can tell you this, the absolute garbage that dominates the international movie screens that is produced in America right now is a direct reflection of the need / desire / opportunity inherent in global media companies trying to sell "entertainment" to a global population when a very large portion of the global population is in nations with either Tsar type leadership (Russia), Religious Fiefdoms (you know this group), or communist dictatorships (umm China), or quasi-unpredictable elite run "democracies" (India, Malaysia, Indonesia...). 


Much of what dominates the screens, let's call it "trash action", is there because it has nothing to say, just BS violence with every antagonist being defeated by what seems to be the only nation on the planet capable of defeating anything.  And what nation might that be?  Well the US of course.  The US military and or police and or civilians in alliance with the US military or police seem to be the only group of people attacked by every space alien ever dreamed up, every global calamity... you name it.  And every one of these movies make the US look representative of the globe and the US always saves the globe... So if there is one theme that is consistent, it's that white people from the US (with the occasional non white thrown in for political purposes) are the only saviors of the human race.


The moral of the story is these companies want to sell their pictures around the world, most of who's cultures are still intact (outside of the window dressing played to their cultures by the elites of those nations who are pretty much global elite citizens, not really representative of their respective cultures), and in order to sell theses pictures around the world, they have to appease the governments and censors of the various nations to get their pictures shown.  This means you get movies that are treated like corporate food:  designed not to offend the pallets of a large number of people, ie; watered down, tasteless, bland and uninteresting content.  It's all economics, making money.


The films also reflect the culture of the WIERD defined in this paper as Western, Educated, Industrialized, Rich and Democratic, which may suggest why the films are popular.  The propaganda and forced consumption of everything from the WIERD countries by the non WIERD countries is one of the longest standing phenomena, culturally and economically, since the earliest days of colonialism to today's neo-colonialism, of the world's lesser developed nations.  As the WIERD countries become even weirder to many a people outside of the bubble of the WIERD nations, their "entertainment" reflects this and maintains it's curiosity level amongst people not from those nations. 


I can only imagine what some Afghani farmer, tilling his land with an Ox and living in a mud hut thinks when he sees an American Solder.  Martian?  Might as well be.  What about when their TV blasts the music videos commonly viewed by 10 year old WIERD children on a routine basis?  Don't you think that farmer just might want to vomit even thinking his child would view that Sh%@?


Well, it does seem that some of the most accepted and promoted attributes of American Media content in America are the most repulsive and or insulting to one hell of allot of people around the world, emphasizing how weird in fact the culture's of the WIERD nations are.  However, it seems repulsive and insulting usually gets through so long as it does not incite people to think! So if a media company from America wants their movies to regularly appear on the screens of the movie houses in nations where people aren't WIERD then they better make sure the themes are not going to challenge or offend either a) the balance of power of the non WIERD nation, b) the cultural value set that exist there c) the egos of the dictator/s that might run the non WIERD nation or d) the censors and politicians that might claim offence on behalf of their "constituents" for political theater. 


Though it must be said that the underlying themes in internationally successful movies like "Avatar" where complete mutiny and actions deemed treasonous in any WIERD nations that take place are celebrated around the world or the first "Hunger Games" where sectors of that fictitious nation riot against the state, occasionally get through the sensors, or maybe they don't for I have not seen the actual end version released of these films outside of the US (of course those themes also got by the average American who from my non-scientific observation did not even get or place any weight on those underlying themes).


And I digress...


The point I am trying to make here is a simple one.  There is a huge amount of self censorship in EVERY media outlet in the US right now being applied by the media conglomerates (oligopolies) in their global production of "entertainment".  In the new WIERD nation oligarchical reality (oligarchy has pretty much been the greatest indirect "export" of the WIERD nations for generations and for which the formula is now returning to home base, where the "democracy" is now pretty much theater and the "rich" is being narrowed down to those who work for the military state and it's various off shoots or multinational corporate entities), it's all about making money and placating the population with formulated reality, extreme scripted "reality" and bland, ethnocentric movies that feed self importance to the populous of the WIERD nations and make sure the non WIERD nation's people know who is out there ready to save the world from themselves.


It's all economics baby!  Culture is dead in the eyes of Media Conglomerates. They play by their own rules and get weirder every day.  The best thing any person can do who lives in a WIERD nation is to turn all of it off and read.

Krugman Offers No Solutions. Same ol' Same ol'

The following article makes me angry on so many fronts; I don’t even know where to begin:

The article can be found and starts here: 

On Thursday, the European Central Bank announced a series of new steps it was taking in an effort to boost Europe’s economy. There was a whiff of desperation about the announcement, which was reassuring. Europe, which is doing worse than it did in the 1930s, is clearly in the grip of a deflationary vortex, and it’s good to know that the central bank understands that. But its epiphany may have come too late. It’s far from clear that the measures now on the table will be strong enough to reverse the downward spiral.

And there but for the grace of Bernanke go we. Things in the United States are far from O.K., but we seem (at least for now) to have steered clear of the kind of trap facing Europe. Why? One answer is that the Federal Reserve started doing the right thing years ago, buying trillions of dollars’ worth of bonds in order to avoid the situation its European counterpart now faces.

To even begin to compare the US actions to the European Central Bank’s recent actions is archaic and insane to the least, and ignorant and arrogant to the most.  Europe until very recently essentially did not have a true “central bank” in the way one would understand what a “central bank” is.  Each nation in the Euro Currency block has / had its own central bank, taxing policies, economic policies etc. The European Central bank had almost no direct power to even purchase bonds issued by member countries let alone dictate the finances of each member country.  This “one currency, many nations” structure made Europe a completely different animal from the US where the central bank oversees the entire economy of a very large nation and has full autonomy to set policies and manipulate every aspect of monitory authority without any consent from the US government.  NOTHING like this existed in Europe.  In addition, Europe had a handful of countries that NEVER should have been converted to the Euro in the first phase of Euroization of the member countries.  Their governments were completely reckless, their citizens knew full well their economies were no where near on par with the nations that should have been included in the Core and they acted recklessly as their governments.  It all looked fine for a while, but like any economic anomaly such as pegging a currency, the flawed structure was doomed to fail, credit crises or not, until the Euro countries actually established a strong central bank able to act with autonomy and discretion irrespective of the desires of member governments.

You can argue, and I would, that the Fed should have done even more. But Fed officials have faced fierce attacks all the way. Pundits, politicians and plutocrats have accused them, over and over again, of “debasing” the dollar, and warned that soaring inflation is just around the corner. The predicted surge in inflation has never arrived, but despite being wrong year after year, hardly any of the critics have admitted being wrong or even changed their tune. And the question I’ve been trying to answer is why. What is it that makes a powerful faction in our body politic — call it the deflation caucus — demand tight money even in a depressed, low-inflation economy?

Krugman is completely ignoring the true underlying inflation in the US over the past 35 years.  The CPI number calculations have undergone revisions a couple times in the last 30 years that have dramatically altered the outcome.  Using pre 1980 data, inflation is and has been running near 10% for most of the first 15 years of this century, not withstanding a dip during the credit crises. 

Even using data as calculated in 1990 reveals over 6% inflation over the same period.

Anyone who lives in the US knows that the average paycheck adjusted for even the “official” CPI numbers reveals a paltry $200 annual (yes annual) increase in income since 1980!!  This where all you have to do is go to the US Dept of Labor Statistics and see what the earnings of 1980 are worth in 2013 dollars.   You need $294.18 to match the buying power of $100 in 1980.  What does that tell you about the value of a dollar over this time?  What difference does it make that you now make $47,000 when your parents made $16,354 in 1980?  It has the same purchasing power!  And this is BEFORE we know the true results of the Trillions in dollars printed over the last 5 years. Note: the 1980 number came AFTER the serious spiraling of inflation of the 1970’s.  So what is Krugman trying to say about inflation?  That it is a “political issue” whether or not all this money printing is going to have any longer term affect?  Really?  What about China?  The US may have used somewhere near $14 Trillion to bail out the “financial system” during the crises and gone on to print a few Trillion Dollars but China has outshined all nations combined printing a whopping $15 Trillion!!

One thing is clear: Like so much else these days, monetary policy has become very much a partisan issue. It’s not just that talk of dollar debasement comes pretty much exclusively from the right of the political spectrum; inflation paranoia has, to a remarkable extent, become a matter of conservative political correctness, so that even economists who should know better have joined in the chorus. So we can focus the question further: Why do people on the right hate monetary expansion, even when it’s desperately needed?

One answer is the power of truthiness — Stephen Colbert’s justly famed term for things that aren’t true, but feel true to some people. “The Fed is printing money, printing money leads to inflation, and inflation is always a bad thing” is a triply untrue statement, but it feels true to a lot of people. And, yes, a tendency to prefer truthiness to more complicated truth is and pretty much always has been associated with political conservatism, and this tendency is especially strong in an era when leading politicians get their monetary theory from Ayn Rand novels.

Another answer is class interest. Inflation helps debtors and hurts creditors, deflation does the reverse. And the wealthy are much more likely than workers and the poor to be creditors, to have money in the bank and bonds in their portfolio rather than mortgages and credit-card balances outstanding. Back in the Gilded Age, the elite mobilized en masse to defeat William Jennings Bryan, who threatened to take the United States off the gold standard; campaign spending as a percentage of G.D.P. was far higher in 1896 than in any presidential election before or since. Are the wealthy similarly mobilized against easy-money policies today?

Is Krugman serious when he quotes Stephen Colbert, a comedian, then waste 3 paragraphs telling us all the concerns about the recent policies of Central banks from China to Europe, policies that have taken humankind into completely uncharted territory with respect to Central Bank policy and experimentation to counter the largest credit crises in history which was preceded and followed by the largest expansion of debt in history at EVERY level of the economy and continues to expand under near forced direction by central banks today where they are saying “buy debt and issue debt and if you will not we will do both”, is nothing but a political / class issue? Does he even understand inflation?  Saying the “wealthy” are only to be hurt by inflation because they have “bonds in their portfolio” rather than “credit-card balances and mortgages”?  Does he even understand that the “wealthy” own real property that tends to keep up with inflation not the mortgaged and credit-card poor.  In fact, by pure definition, if the “poor” wages rise relative to their mortgage at fixed rates and credit cards capped interest, they would actually be better off as long as they don’t loose their jobs!!  What is he trying to say here?  In one paragraph he is trying to say the rich are not complaining so why should we worry?  Are the wealthy not the ONLY class of people that have benefited from the huge injection of cash which has allowed companies to refinance and issue debt to buy back their stocks and increase dividends with almost free money driving the stock markets higher and higher in the process?  The wealthy are the ones who have seen their bond portfolios increase in value year after year as interest rates fell to zero and are kept there under central bank policies.  The distortions in managing “risk” at every level are so outlandish today in the markets that this distortion is now being called “the new normal” on Wall Street!  Complacency is ripe, risk is high, volatility at historic lows, and everyone is chasing yields pushing rates down on essentially bankrupt nations like Spain, with 20% unemployment below that of the US!  High yield debt almost does not exist as spreads of low grade bonds of all kinds’ trade at premiums to US Treasuries at levels not seen since 2006, at the height of the credit bubble.  I could go on.  So all Krugman has to say is the debate is a political and class debate and not to worry, all central banks should follow the US lead, irrespective of the dynamics on the ground and just print money, buy bonds, support risk taking, force banks to lend, lend, lend….

As far as I know, we don’t have rigorous evidence to that effect. There are certainly a lot of wealthy investors in the debasing-the-dollar crowd, but we don’t know for sure how representative they are — and you could argue that big investors should like the Fed’s expansionary policies, which have been very good for the stock market. But the wealthy may not trust that connection, in part because the inflationary ’70s were very bad for stocks. And we do know that the very wealthy are much more likely than the general public to consider budget deficits our biggest problem, even though fiscal austerity is probably bad for profits. So perceived class interest is probably also a key motivation for the deflation caucus.

Is Krugman serious here?  Comparing today’s Fed’s expansionary policies to the 1970’s?  Does he even have the capability to differentiate the 1970’s oil price driven global inflation surge which came on the heals of the end of the US productivity surge of the 1950-60’s, the tail end of a protracted pointless and expensive war, and the end of US industry’s life cycle of post war investment in production which started the long decline of industrial production?  Does he really get away with comparing this era to today?  Fiscal Austerity?  Does he even comprehend the level of recklessness of the budgets of ALL nations who command the “hard currencies” of the world today and how this is going to radically alter the shape of global finance in the future?

A side note: Europe’s wealthy aren’t as wealthy or influential as their American counterparts, but creditor interests are nonetheless even more powerful than they are here because creditor nations, Germany in particular, have ended up dictating policy for the whole of Europe.

Is he serious here?  Europe’s wealthy may not be on the front page of Bloomberg every day, but they hold their wealth in “productive capacity” and “hard assets” accumulated over a very long time, not just in “paper” i.e.; stocks that have ever risen to unrealistic heights catapulting them to the stratosphere and making them de-facto mouthpiece of the American multinational and reminding people that our nation’s economic structure far more resembles the same 1896 he quotes in this article, with the robber barons, oligopolistic structure of industry and bought out government then some 21^st century successful economic system?  To make a statement like this is completely ignorant, arrogant and ethnocentric as one could make!!

And the important thing to understand is that the dominance of creditor interests on both sides of the Atlantic, supported by false but viscerally appealing economic doctrines, has had tragic consequences. Our economies have been dragged down by the woes of debtors, who have been forced to slash spending. To avoid a deep, prolonged slump, we needed policies to offset this drag. What we got instead was an obsession with the evils of budget deficits and paranoia over inflation — and a slump that has gone on and on.

Once again, even his final statement is hogwash to no end.  He suggest NO structural remedies for what we all know was a “crises” predicated on a never before seen debt bubble facilitated by ever creative “products” designed to off load risk that became the core of the irresponsible lending mantra.  All of these “products” were created and traded in casino fashion, were completely unregulated, dragged in the participation of every financial institution including taxpayer insured banks, were built on the back of every possible category of debt imaginable (and some unimaginable creations).  Yet he suggests that the role of central banks is to somehow “counter” this?  All the central banks on the planet did not have enough firepower to counter the crises. This is blatantly obvious.  They have had to print Trillions of Dollars, everywhere, to make a dent in the disaster.  Yet people like Krugman have NOTHING to offer to cure this complete collapse and failure of the “free market system” other than to say, just print more money so the party can go on!  What a complete looser!

The Bizarre Economic Theory Behind US Foreign Policy

I just finished reading the article in The Atlantic written by Jeffrey Goldberg where he talks with Hillary Clinton about Foreign Policy.

The article for the most part has nothing interesting to add to anyone's understanding of US foreign policy if said person takes time to keep up on what is going on around the world and has a basic understanding of recent history.  I don't even know why the article got so much hype.  The headline that drew me to the article was from another media source which claimed Ms. Clinton was critical of President Obama's foreign policy.  In fact she simply suggested there were factions, including apparently herself, that felt the Obama should have been more proactive and directly engaging in helping anti Syrian protesters turned militants to overthrow Assad.  Big deal.  If you read the whole article you will see that there is no guarantee that this would have resulted in any better outcome and
the US policies towards Libya are cited as evident of such.  It is also normal in any administration to have issues that draw strong feelings on both sides and an administration / leader has to make a decision some will not like and they are free to resign in protest.

For me, the most striking statement made by Ms. Clinton hits a very strong nerve in my understanding of the ignorance of one aspect of US foreign policy (and that of many other governments around the world who pump boatloads of humanitarian aid into developing nations) that has hijacked "group think" amongst most of the international organizations that are financed and overseen by "The Western Powers" ie; the US and Europe, and that statement is:

You can’t grow your GDP without opening the doors to full participation of women and girls in the formal economy.

I will not attempt to argue the merits of this statement other then to say, having lived in Washington, DC for some time and being privy to the occasional presentation / discussion / conversation on the topic of foreign aid and development of underdeveloped countries, I have seen the progression and metastization of this idea over some time.  I have often questioned its merits.  I have seen where the "research" on the issue comes from and read many articles that profess it's validity.  However, it is also clear the the statement is completely false if taken in the context of what it is supposedly implies: that "full participation", meaning the education and workforce participation of women vs woman's traditional participation in the "economy", i.e.; not through education and workforce participation, which was predominant through the middle of the 20th century in the same "western" nations that now profess this role, "must" be redefined to fit the "group think" of the global powers that control and shape "development" aid around the world.   Think about this: Was there not incredible economic growth in Western Nations between 1790 and 1860 or between 1860 to 1930?  What was the "full participation of women and girls in the formal economy" then?

What I am going to do is call a spade a spade and stick my neck out and say something that may offend many people and I really don't give a damn because I strongly believe the current thinking on the subject in the West does more to feed distrust and push-back against the West then any other single foreign policy issue on the international agenda.  The ideology that backs the statement Ms. Clinton made is an ideology designed specifically to attack a core value of what defines Muslim Identity around the world.  The overriding emphasis on this "full participation of women" ideology is the most powerful public policy agenda against Islam and the most powerful rallying call to the populations of nations who are called upon to submit their young people to war against people who call Islam their religion.

I am not going to say that the emergence and success of something like "micro-lending" around the world, which goes primarily to women, and assumes that these women's economic success are at the core of pulling people and hence nations out of poverty, does not have merit.  But where is the world's poverty index in the 20 odd years of this phenomenon?  It is amazing how many "economic" studies still use $1 or $1.25 as some kind of base number to measure poverty!  They also use 1990 as a base year... You do the math.  How many dollars does it take to equate to the real purchasing power of $1.25 in 2014 relative to 1990?  Try $2.25, almost double. Take even a smaller increase in this number to $2 and you get:

In all, 2.4 billion people lived on less than US $2 a day in 2010, the average poverty line in developing countries and another common measurement of deep deprivation. That is only a slight decline from 2.59 billion in 1981.

In the US alone the poverty rate has doubled in near urban suburbs and gone up 50% in cities since 2000 according to this Bloomberg article just released.  The US has a "full" participation of women in it's economy today, not entirely by choice, but also out of the need to survive as the vast majority of Americans do not have access to the jobs of the elite 30% or so of the nation's population who have the education and access to high paying jobs. Besides, it only takes a decade of completely reckless Western financial markets that have essentially turned the global economic system into one large gambling casino functioning much more like its 1914 then 2014, to completely reverse ALL of the International efforts to eradicate poverty over the same time.  You know how easy it is to wipe out 20 years of economic "progress".  The people who play in this casino have NO interest in their repercussions on the world's population. That is not what makes them tick.  How large the participation of women in a given economic system is moot when taking this into consideration.

So the next time you hear some "do good", well educated (well indoctrinated) person stand up and try to make a case that "You can’t grow your GDP without opening the doors to full participation of women and girls in the formal economy.", ask them where that idea ever came from in the first place.  They will not be able to answer you in historical terms, only in the propaganda they have been fed over the last couple of decades, those same decades where "we" (the West) have been in an ever growing global war against Islam and the same two decades where in our world the "labor force participation (i.e.; economic) of women and girls" has long since peaked and at the same time the poverty indexes of many developed nations with this high participation rate have also increased, jobs have evaporated and the standard of living has worsened.

So show me where Ms. Clinton's statement is more beneficial then harmful in foreign policy today and show me the economic proof that historically what she claims is true.

Americans Have Completely Lost it Or?

Just read this article in Marketwatch and am severely disappointed at what I read, hence the title of this post.

Now remember those recent debt stories like this one also in Marketwatch, or this one in the NY Times about the exploding sub-prime auto loans?  Well Americans are not stupid, they have just lost their minds.  When they are gonna get a sub-prime loan, might as damn well get the fattest vehicle on the lot!!  Hell yea, "we don't deny anybody" ads are everywhere.  If you not gonna pay anyway, might as well ride in style for 2-3 months!! 

Now the last SUV boom went from early 90's to about 2007-8 when subprime loans hit the fan the first time and gas in the US hit $4/gallon (really gallons?  WTF or where in the world is anyone still using gallons?).  That was when reality hit the debt laden Americans.  It was not just the SUV (truck charade as a passenger vehicle with a fancy new acronym and commercials of vehicles on driving on unpaved roads into the sunset, in a nation with more paved roads per-capata then anywhere else on the planet) monthly $500 for five years, but the $1,000 it takes to change the tyres or the estimated $9,000 a year cost of owning the vehicle on top of the monthly payment (including depreciation, gas and maintenance according to AAA), that really set the average debt laden American to think twice about continuing to buy them, free money or not.  Lets also not forget the crash of the debt bubble which cost millions of American jobs in the course of a few months.

Either way, I was ecstatic.  Whatever it took to make the idiot Americans who just spent some $2 Trillion dollars on two pointless wars wake the F&%^ up was just fine with me.  The SUV craze, and the most stupid thing that ever happened to the American Consumer landscape was finally over.

Unfortunately it took till 2012 for nearly every auto maker to have a decent "small car" on offer.  People actually bought them.  Unfortunately according to the articles I just read, those sales peaked just last year.  When I was back in the US visiting this spring the only small car on the TV I can remember being marketed hard was the Mini.  Every other ad I can remember was for Trucks / SUV's again, climbing mountains with no paved roads, bringing families to camping sites or the beach with their Truck/SUV filled with Chinese plastic BS, not carousing suburban mall parking lots where 99% of them end up.  It's working.  Now the Truck/SUV is topping sales again!  What is up with that?  Gas gas prices are only $.50 from their all time high, averaging $3.50 / gallon nationwide?  

It is the Sub-Prime Loan.  Cheap easy money going to those who are MOST affected by the millions in marketing dollars poured into mass media also happen to be those most likely to max out what they can spend, giving into the unscrupulous and money driven dealers and sales people who know how lucrative it is to make that high interest loan and fat paycheck when those loans are sold to the Wall Street Vultures who will repack them and strip them and sell derivatives on or against them... You know the drill.

Have Americans completely lost it?  Damn right they have! There are like three active wars in the Mid east now not to mention the complete destabilization of Libya and Egypt and most of N. Africa is in some kind of conflict with rebels.  Ukraine is at war with very large implications.  Anything could spark a major oil price hike.  Are the US people completely ignorant of these things?  Absolutely.  That gas could be $5-$6 in the next 2 years?   Yes. That the US fund to build roads / highways / etc. is bankrupt and has to be bailed out right now by legislation / budget items?  Damn right!  That several states are being forced to increase their gas taxes and the Fed might do it as well?  Yes, Yes Yes...  It's better than an orgasm, it's a perfect storm brewing.  Americans are prone to mass suicide in more ways then any culture / experimental nation in the course of history. 

I hated SUV (living room trucks) since the day the first one was made.  I hoped they were going to be a footnote one day.  Guess I am wrong on that one.  There is a saying about markets:  "Markets can remain irrational longer than one can remain solvent." or something to that effect.  Well it seems Americans can remain Completely Insane much longer than any rational person would think they could get their S%&^ back together again.

I guess all the hormones and chemicals and GMO fat and sugar laden nutrient deficient food has managed to not only double their body size, but their ignorance as well.  

Net Neutrality, My Take on the "Open Internet"

FCC

Washington, DC

Re: Protecting and Promoting the Open Internet

Dear FCC Commissioners,

I am writing this letter with respect to the “Open Internet” discussion.  I am inspired to write on this issue as for a substantial part of my initial career as an owner of a company that sold telecommunications services, I was constantly affected directly or indirectly by the telecommunications industry.

First of all I would like to make perfectly clear to you commissioners that there exist no real issue with respect to so called “Open Internet”.  The reason this discussion is called “Protecting and Promoting the Open Internet” is because the “industry” that controls Internet traffic has created or let’s say “manufactured” this issue by attacking the “21^st Century” companies that are delivering content via the Internet.  Once again they are using their overwhelmingly powerful positions as virtual monopolies in the delivery of service and oligopoly status as backbone providers to lobby the government to maintain this power and position just like they have done so in the past.  In reality there is no issue.  The Internet is just fine as an open network with equal access to all.  It just so happens, some of the companies that control access to the Internet also are “last mile” companies, providing consumers access to the internet.  These companies also have invested in content creation, for example Verizon’s investment in making FIOS an alternative to Cable for TV viewing, and are in direct competition with true new generation Internet Media Companies like Netflix or YouTube (Actually today many prior mostly information providers like AOL or retailers like Amazon are getting into the “program creation” game).  Other “last mile” companies like the cable firms are also very interested in making this an “issue” as they to are in the content business, especially Comcast (now in merger agreement with Time Warner Cable), who also owns NBC Universal, also a “Media Company”.   

Another entire area of explosive growth via the Internet are communication services like Skype, Viber, Kakao, Google Talk, Nimbuzz and a host of others that are rapidly making the last dominant area of the Regional Bell companies and Long Distance providers completely obsolete, driving their legacy business further in the grave.  I use these services myself and I believe these services present the most disruptive alternative communications technology that has emerged.  They are connecting people all over the world for no extra cost then their Internet connection whether it is broadband, landline (DSL, cable and the like) or over mobile networks.  In my mind the Internet providers via their PR firms, lawyers and lobbyist are using Netscape and other such content delivery services as a scapegoat for practical reasons, to divert focus of the real threat to their legacy telecommunications services (the Public Access Telecommunications Services).  The reality today is the Internet is the Public Access Telecommunications Service of the 21^st Century and there is no questioning this reality any longer.

We all know the tendency of these Telecommunications providers, be they Internet Backbone or Last mile service providers or both, to cry foul when someone is disrupting their dominant positions.  We also know their cries are completely foul and without merit.  If one looks at Netflix for example, one must also look at Amazon.  Amazon took upon the challenge to host Netflix’s content nationally and the explosive growth in Netflix’s popularity did not cause Amazon to cry foul and run to the government for “help” or a “bail out”.  Instead Amazon worked and continues to work day and night upgrading their technology, to deliver an impressive load of as much as 30% of the traffic of the Internet during peak times not just to TV’s all over the nation but to any and every devise out there that is capable of receiving Netflix’s service, all scaled to maximize the user experience while minimizing the use of network resources and delivered from the nearest access point in a few milliseconds.  Why are the RBOC’s and Internet Backbone and Cable companies not taking up the same challenge? The technology is there to manage all the Internet traffic the most robust providers of content can muster.  Whether you are Facebook, YouTube, Netflix, Vimeo, AOL, Yahoo, Google or the latest new entry into the content space, the ability to offer “Open Internet” access is NOT Challenged.  As long as customers demand access to these services and are willing to pay for Internet access, there is a business model that will be profitable.   

Any person with even the slightest knowledge of what is going on in the Internet / Media / Telecommunication industry knows where there are HUGE conflicts of interest and knows why, especially in the US, where regulated (or unregulated depending on what side of the spectrum you are on in your interpretation of reality) monopolies aka Internet Service Providers, control consumer access to the Internet / Television, this has become such a “big” issue that has now made it’s way the FCC.   However, I cannot stress enough that the issue of “Open Internet” is completely manufactured primarily these ISP’s and it is these same firms that have kept Americans in the dark so to speak with respect to reasonably priced high speed internet access for a couple of decades now.  Only today, in 2014, they have grown larger, their control over access has become more concentrated and their behavior more monopolistic. 

Let me give you a little history lesson from the 1990’s.

I started my business in 1988-9 before the Internet was a readably available service.  Dealing with the Regional Incumbent Bell Operating Companies (Bell Atlantic at that time) was a nightmare.  They were rigid, expensive, had poor customer service, belligerent, righteous and completely unpleasant to deal with (As of 2012, the last time I had to deal with them from a business perspective, nothing had changed. To wake up knowing I had to deal with Verizon that day meant 4 plus hours of my time in agony and disgust).  The biggest game in town at that time was Long Distance and the circus of companies trying to obtain your business, including the RBOC’s, either legally or illegally (cramming, slamming etc.) was intense.  I cannot tell you how many times I tried to do something with my telephone service and had a “customer service” rep literally read me regulations, regulations they essentially used to their advantage for years and helped write, telling me what they could not do.

Within a few short years the Internet emerged via dial up Internet Service Providers who were soon knocking at my door and mailing disks and calling me all to obtain my business.  This ISP industry exploded in the back yards of the RBOC’s and they completely blew it off.  They were busy taking the money they were gouging from us suckers who were stuck in their service areas and “investing” it overseas or busy paying out huge dividends to their shareholders while continuing to operate analog switching technology, upgrading at a snail’s pace to digital technology (while the rest of the developed world was already offering early more reliable digital services like ISDN not to mention already having launched digital wireless services).  It was not that the RBOC’s were unaware of these technologies.  They would be fighting in say the UK or some country in S. America for competitive access to the local telecommunications market at the same time back in the US they had armies of lawyers defending their monopolies and their poor operating practices.

Anyway, after a few short years these telecom firms woke up one morning and realized their half century or older legacy networks could no longer handle all this traffic that was being routed on their networks by the emerging ISP industry.  Just like good monopolist what did they do?  Well they ran to Uncle Sam of course and the FCC and cried for “metered” local telephone service saying they did not have the money to upgrade their networks, or they were just plain unwilling to make the investment for “someone else’s benefit” i.e.; the ISP’s who were charging $10-$30 per month per phone line to access the internet.

The Smartest thing the FCC and Congress did in my lifetime with respect to telecommunications was to tell the RBOC’s “NO” to metered service.   As we all know now, that stampede of ISP’s entering the telecommunications industry was the largest motivation for the 1996 Telecommunications Deregulation Bill that passed congress and became law only to have nearly every aspect of it overturned through the courts with the hundreds of millions of taxpayer / ratepayer monopoly dollars the RBOC’s, led by Verizon, threw at the law through the courts to have it overturned.  The idea that the infrastructure could be shared by competing firms who could offer local telecommunications service, internet etc. using new technology was squashed nearly as fast as it took hold. As it is today, those facilities all over the nation that housed legacy analog switching technology could have easily housed multiple companies accessing the network.  I have seen in my own back yard these legacy buildings being torn down or redeveloped into condos or what have you.  In the mean time, the RBOC’s of the time held manipulated congress and FCC threatening not to upgrade their networks (installing Fiber etc.) as long as there was competitive access.  This was a very tactical game played by the Lawyer run RBOC’s in a strategic battle to maintain their monopoly status and continue to soak as much money as possible out of their monopoly territories while stifling all competition’s attempts to circumvent their outdated legacy technology and offer better services to the end users.  The RBOC’s won that battle and still operate as monopolies today (along with their cable brethren).

What is the moral of this story?  Simple. For anyone with any understanding of the recent history of Telecommunications in America today knows without question where and why there is an “issue” of “Open Internet” today.  These same companies since those days 20 years ago have become entertainment providers, using their monopoly status to capture every aspect of communications in the end user’s house, their phone service, internet service and television service and in many cases their wireless service. 

Now there are alternative “content providers” using the Internet to deliver their content and at the same time are charging their end users a monthly fee (not unlike ISP’s in the early days of the Internet) the ISP’s of today (the same old monopoly operators) don’t like it and they have never liked when they are not getting a piece of the action.  They are doing nothing but the same old asking for metered service of the Internet just like they did with local phone calls 20 years ago.  They are likely prepared to sue, or threaten not to invest / upgrade their networks, claim they cannot handle the traffic or a combination of all of the above plus whatever else their lawyers and accountants can think up to put the fear of Jesus into the FCC and Congress that the whole house is about to come crumbling down if they don’t do something.

Well I have the solution for you.  You, the FCC, tell the companies that control access to the Internet and or the Backbone to the Internet or both, “You either invest in your networks to keep up with the demands of the Internet as a whole or we will pull your charter to operate in the United States and auction it to someone who will.”  It is a simple as that.  Expect a check in the mail once the auction is over with and see ya! 

That is my suggestion to you nice people there in the FCC and Congress.  Don’t take their crap.  They are NOT leading the world in any aspect of what they do.  They have forever scalped their end users with inferior technology and kept America years behind other developed (or even developing nations going back 20 years if you consider Korea or Hungary for example) nations in Internet access technology and services.  Keep the Internet Open and put it in Law.   The Internet is the new Public Access Communications Platform of today and Open Access is not to be threatened again PERIOD.  Like it or Leave it. It’s as simple as that.

Sincerely,

The Office Supply Oligopoly is Reeling

Today's earnings announcement from one of the two major players in the "bricks and mortar" office supply retailers, Office Depot, was another telling story of the state of retail in America. Fewer and fewer players are offering more and more shelf space to fewer and fewer suppliers, resulting in lower selection, quality and higher prices to consumers over the last 20 years.  FINALLY this is catching up to the retailers and is sending their businesses into a free fall.  Anyone with 1/2 a brain knows to buy office supplies on line from Non-Brick and Mortar companies that gouge and rip off any flesh and blood buyer that walks into one of their stores.

The announcement read on Seeking Alpha states Office Depot will close 400 stores after it's merger with the other oligopoly player Office Max in November 2013. Staples, the 3rd oligopolist, announced just about a month ago the closing of over 200 stores. 

There is no mistake in why these companies are reeling from their business models.  They are totally flawed.  The model has been replicated in retail across the US for a couple decades:  Open big box stores with a large selection of supplies in every category.  Start with low prices that drives out all the "mom & pop" business that dominated the industry since the beginning of time.  Then start weeding out your suppliers, shrinking the selection of products in each category, while slowly raising prices.  Eventually each product category is down to one supplier and maybe your store brand.  Then keep raising prices.  Meanwhile, the producers of all of the products you used to sell start to also go out of business.  Thousands more manufacturing jobs disappear as the major retailers squeeze out the supply chain till it virtually disappears for all but the select few suppliers.  Now the retailer "is" the supply chain and those who produce products sell directly into that supply chain and are forced to continuesly lower their prices (forcing more and more production "off shore") to increase the profit margin of the retailer.  The also start to lower the quality of their own products to meet this spiraling need for higher profits every quarter to their investors as well.  If they don't play this game they will get swallowed up or merge or go out of business all together.  In the end it is just the end consumer who looses every time.

Enter the Internet and the migration of some of the more tech savvy "mom & pop" businesses.  They find those suppliers left producing and selling products to the non-oligopoly retailers and start selling  online at steep discounts to the brick and mortar retailers.  This phenomena starts to seriously eat into the business of the oligopolist.  Business, the bread and butter of the office supply industry, are not stupid. They go to alternative suppliers. The brick and mortar business start to market more to retail buyers, trying to sell consumer electronics, back to school supplies and other non-core products to consumers who are not as knowledgeable about pricing, are less frequent buyers and easier to rip off.  Eventually even this approach fails as consumers catch up to the game.  Stores close.

The above scenario has happened in many retail industries in the US.  One has to wonder what is on the minds of the Fed and other "economist" when they say there has been no inflation for so long and they are hell bent on increasing this supposedly non existent inflation.  Obviously they have no understanding of the retail dynamics that have been going on in the US for years. The fact that so many of the products Americans buy are sold by so few sellers and those sellers have been diligently shrinking their suppliers, resulting in prices that have done nothing but rise for the last two decades to the retail consumer seems to escape them.

Case in point: I went to buy one gallon of deck sealer a week ago for my deck.  I went to Sherwin Ripoff, I mean Williams.  This is another brick and mortar retailer to both consumer and contractor businesses that had to merge with Duron to stay in business, creating yet another strong oligopoly player in the paint business.   The result: One gallon of deck sealer is $47!  Yes $47 for a GALLON of deck sealer!!  This is INSANE!  I could start replacing the wooden deck boards for the cost of just two gallons of sealer to protect the wood!  Why is this so?  How is it possible?  (The Fed would say there is no inflation because the quality of the deck sealer has increased so much it is now WORTH $47! Ha!) Simple, from the chemical manufactures to the retailers there has been such consolidation that there are no other product options available.  What better then a heavy, expensive to ship item like paint to create an oligopoly industry in.  I could literally buy raw ingredients and make the gallon of deck sealer for less than $47 if I really wanted to. 

I refused to buy the Sherwin Ripoff sealer.  Instead I went to one of the other oligopoly sellers of paint products, Home Depot (the other being Lowes) where the retailer has followed the same pattern explained above and only allows ONE brand of deck sealer on their entire shelf space, Bear.  What is the result?  I got a gallon for ONLY $33.  Yea, deck sealer is worth about $8-$10 Max.  But we as a retail buyer are paying $33-$50 for the product.  Sure the profit margins are rising across the board for the few companies still manufacturing and selling the products but for how long before the entire game implodes? 

Who pays the most for this consolidation?  Well simply put, I can still swing the $33.  But to the rest of the world where $33 can be a day to a week's wages, no way.  The cost of buying nearly EVERYTHING has gone further and further out of reach of the rest of the world.  Yet you will hear hot shot economists bragging that the number of people living on less than $1 a day has declined to like a billion people.   Big F&%#@ing deal!  One needs $3 a day to even think about living in today's world without completely starving yet economist are still using a 25 year old metric to measure poverty.  Where are the central bankers and economist who actually see how the world works, not just plug in numbers in the latest modeling software and call it a day?