Why Japanese People Don't "Want" Things Anymore

His explainations make a lot of sense, as do his conclusions. And we don't have to choose between the extreams of Diogenes and Alexander. There is plenty room in between to make authentic choices.

Ultimately, most elections are about The Economy

An not just the actually economy, but how the average person perceives it, and is affected by it.
How easy is it get a mortgage? Buy groceries? This article explains it well:

What Just Happened - it was the economy, stupid.

The link doesn't allow me to cut and paste quotes. But the article goes through a list of many strong points, that basically add up to many Americans feel shut out of the American Dream. Half of Americans are spending 30% or more on rent or mortgage payments, which are a stressful burden. Inflation has slowed, but prices are still rising. The article says a lot more, it's worth reading the whole thing. I think it really explains well, what we are seeing here.

     

Death of the working class... and of Capitalism, as we knew it?

How fighting one pandemic can deepen another Review of “Deaths of Despair and the Future of Capitalism” by Anne Case and Angus Deaton

By Carlos Lozada, Book critic
May 1, 2020 at 5:00 a.m. PDT
DEATHS OF DESPAIR AND THE FUTURE OF CAPITALISM
By Anne Case and Angus Deaton.
Princeton University Press. 312 pp. $27.95

Even before the coronavirus struck, America was suffering an eviscerating epidemic. Its cause was not a virus; its spread could not be blamed on foreign travelers or college kids on spring break. No masks or gloves could slow its contagion, no vaccine could prevent new cases. Its toll is clear in the rising deaths of white Americans in their mid-40s to mid-50s over the past two decades, particularly in states such as Arkansas, Kentucky, Mississippi and West Virginia.

Princeton University economists Anne Case and Angus Deaton call these “deaths of despair” — the deaths from suicide, drug overdoses and alcoholic liver disease ravaging swaths of the country. The victims, overwhelmingly, are less-educated Americans whose loss of life was preceded by a loss of jobs, community and dignity, and whose deaths, the authors argue, are inextricable from the policies and politics transforming the U.S. economy into an engine of inequality and suffering. “The American economy has shifted away from serving ordinary people and toward serving businesses, their managers, and their owners,” Case and Deaton write in their new work, “Deaths of Despair and the Future of Capitalism.”

Although the authors completed this book before the onset of the coronavirus pandemic — it was published four days after President Trump declared a national emergency — their diagnosis is still painfully relevant. Mass unemployment and mass infection, occurring simultaneously in a nation where health insurance often depends on employment, threaten to both prove and aggravate the conditions Case and Deaton describe. The debate over how quickly to ease social distancing restrictions and get the economy moving again forces a reckoning: How do we balance the risk of increased coronavirus infections if we reopen the economy too soon against the risk of more deaths of despair if we do so too late? “Jobs are not just the source of money; they are the basis for the rituals, customs, and routines of working-class life,” Case and Deaton write. “Destroy work and, in the end, working-class life cannot survive.”

Reading this book during a pandemic, I found myself bracing for more death — from the virus or from despair, and, more likely, from both.

Many memoirs, histories and investigations have been written on America’s white working class in recent years, probably too many, but fewer purely economic studies. Case and Deaton are world-renowned practitioners of the dismal science (Case is a top expert on the links between economic and health status, while Deaton snagged a Nobel in 2015 for his work on household poverty and welfare), and their lens on the subject makes for stark reading. They estimate the magnitude of the deaths of despair in the United States by comparing the improving trend lines of recent decades — i.e., if mortality rates had continued falling as before — with what actually came to pass.

“When we add up those numbers from 1999, the critical point where the turnaround began, to 2017,” the authors report, “we get a very large total: 600,000 deaths of midlife Americans who would be alive if progress had gone on as expected.” Case and Deaton liken that number to “what we might see during the ravages of an infectious disease, like the Great Influenza Pandemic of 1918.” They also compare it to the roughly 675,000 deaths of HIV/AIDS in the United States since the early 1980s.

Case and Deaton are largely dismissive of arguments that stress the supposed individual or cultural failings of the white working class, and they focus instead on systemic shortcomings that lead to deaths of despair. Manufacturing towns and cities have seen their factories boarded up, they write, and “in the wreckage, the temptations of alcohol and drugs lured many to their deaths.” Education is another consideration, the authors argue, with “almost all” of the increase in deaths due to suicide, alcoholism and drug overdoses found among people who lack bachelor’s degrees. Deteriorating health matters as well. “Many people are experiencing pain, serious mental distress, and difficulty going about their day-to-day lives,” Case and Deaton write. These conditions make it harder for them to work, which reduces income and undercuts work as a source of “satisfaction and meaning” in their lives.

Who lives, who dies, who decides: How the virus makes us weigh the value of one life

More than 30 million Americans have sought unemployment aid since mid-March, a level of dislocation not seen since the Great Depression. In this context, the impulse to return to work is understandable. Yet the loss of earnings, Case and Deaton contend, is just part of the challenge. “Much more important for despair is the decline of family, community, and religion,” they write, a decline they regard as related to falling wages and disappearing jobs, but distinct from them. Other authors have tackled this problem recently — see, for instance, Timothy P. Carney’s insightful 2019 book, “Alienated America” — and collectively, their conclusion is clear: Long before we began social distancing, Americans had already grown far too distant from one another.

Case and Deaton focus on the white working class because it is undergoing a particularly harrowing shift, not because they believe this demographic matters more than others (they don’t) or because it is worse off in absolute terms than others (it isn’t). Black mortality rates remain persistently higher than white ones, the authors point out, even considering the increased deaths of despair among white Americans. But black mortality rates are falling faster than white rates — and the deaths of despair among white citizens are the difference. “The main reason why death rates of blacks fell more rapidly than death rates of whites at the beginning of the twenty-first century is that blacks were not suffering the epidemic of overdoses, suicide, and alcoholism,” Case and Deaton explain. [...]

It's worth reading the whole thing. While I don't consider myself an anti-capitalist at all, there have been changes in the economy, locally an globally, that have been eliminating working class jobs and incomes. It's a reality.

When Obamacare tried to force small businesses to provide health care for full time employees, the employment industry responded by making all employees part time. I worked as a tax preparer, dealing with all their W-2 forms, and was astounded at how many families were raising children, with two parents working at an assortment of part-time jobs, to pay their bills and keep thier families alive.

This article touches on many causes, and asks many questions we need to face, as it's only going to continue to get worse for the majority of people, if viable solutions are not found.

Many of these people are Trump supporters. And they will vote for Trump, no matter what anyone says, because they feel that the Democrats don't care wether they live or die, so they will vote for anyone who opposes the Democrats. You can argue about wether that perception is right or wrong. But it won't change the fact that they percieve it that way. If the Democrats are serious about winning more votes, they should be addressing this, instead of only attacking Trump non-stop. They have been doing that for the past four years, and it hasn't worked. Isn't it about time they try something that does?

I have Democrat friends who believe that all Trump supporters are racists, bigots and morons. And that if they keep repeating that mantra, it's going to win them the elections. But I think they have forgotten, what every election is about: it's the economy, stupid. Duh. It affects the most people. And the majority will vote for whoever they think, whoever they perceive, will do the better job of that.

     

Death rates rise for middle aged white Americans

Death Rates Rising for Middle-Aged White Americans, Study Finds

[...] The mortality rate for whites 45 to 54 years old with no more than a high school education increased by 134 deaths per 100,000 people from 1999 to 2014.

“It is difficult to find modern settings with survival losses of this magnitude,” wrote two Dartmouth economists, Ellen Meara and Jonathan S. Skinner, in a commentary to the Deaton-Case analysis to be published in Proceedings of the National Academy of Sciences.

“Wow,” said Samuel Preston, a professor of sociology at the University of Pennsylvania and an expert on mortality trends and the health of populations, who was not involved in the research. “This is a vivid indication that something is awry in these American households.”

Dr. Deaton had but one parallel. “Only H.I.V./AIDS in contemporary times has done anything like this,” he said.

In contrast, the death rate for middle-aged blacks and Hispanics continued to decline during the same period, as did death rates for younger and older people of all races and ethnic groups.

Middle-aged blacks still have a higher mortality rate than whites — 581 per 100,000, compared with 415 for whites — but the gap is closing, and the rate for middle-aged Hispanics is far lower than for middle-aged whites at 262 per 100,000.

David M. Cutler, a Harvard health care economist, said that although it was known that people were dying from causes like opioid addiction, the thought was that those deaths were just blips in the health care statistics and that over all everyone’s health was improving. The new paper, he said, “shows those blips are more like incoming missiles.”

Dr. Deaton and Dr. Case (who are husband and wife) say they stumbled on their finding by accident, looking at a variety of national data sets on mortality rates and federal surveys that asked people about their levels of pain, disability and general ill health.

Dr. Deaton was looking at statistics on suicide and happiness, skeptical about whether states with a high happiness level have a low suicide rate. (They do not, he discovered; in fact, the opposite is true.) Dr. Case was interested in poor health, including chronic pain because she has suffered for 12 years from disabling and untreatable lower back pain.

Dr. Deaton noticed in national data sets that middle-aged whites were committing suicide at an unprecedented rate and that the all-cause mortality in this group was rising. But suicides alone, he and Dr. Case realized, were not enough to push up overall death rates, so they began looking at other causes of death. That led them to the discovery that deaths from drug and alcohol poisoning also increased in this group.

They concluded that taken together, suicides, drugs and alcohol explained the overall increase in deaths. The effect was largely confined to people with a high school education or less. In that group, death rates rose by 22 percent while they actually fell for those with a college education.

It is not clear why only middle-aged whites had such a rise in their mortality rates. Dr. Meara and Dr. Skinner, in their commentary, considered a variety of explanations — including a pronounced racial difference in the prescription of opioid drugs and their misuse, and a more pessimistic outlook among whites about their financial futures — but say they cannot fully account for the effect. [...]

Read the whole thing for more details, embedded links and more.

I think key to this is the fact that it's affecting whites with only a high school education or less. The job market is particularly tough for them, and their coping skills are likely less resilient. They are more likely to abuse drugs and alcohol. The article goes on to talk about physical pain issues rising in this demographic, also. The combined health and financial problems, with a pessimistic attitude and substance abuse issues, may be proving lethal.

Of course there are those who are quick to say it's merely the Death of White Privledge; Whitey is finding out what it's like to be poor, and can't cope. That authors' agenda isn't mine, I prefer a bit more scientific objectivity. I include the link merely because it's a narrative we are going to hear more and more, as everything continues to get more and more racialized and radicalized.

I think the article about Dr. Deaton and Dr. Case that I've excerpted from here is more objective, and therefor more balanced.

Here is a link to readers comments about the study:
Readers React to Rising Death Rates of Middle-Aged White Americans.

Since the same demographic in other industrialized countries is NOT dying at such an increased rate, I would suggest that the difference is, that many other countries have a permanent unemployed class, that receives better, permanent unemployment benefits and health care. The same demographic here does not, which explains why they gravitate to Bernie Sanders: They want the government to take care of them, European style. Is that the same as the "End of White Privledge"? You decide.

This will be a growing issue as the automation of job tasks continues and jobs continue to disappear. What is to be done with the growing pool of unemployed people, not just here, but globally? It's one of the major challenges we face in the coming Brave New Word.
     

The Myth of Scandinavian Socialism

Here is the Myth exposed:

No, Bernie Sanders, Scandinavia is not a socialist utopia

When Bernie Sanders was asked during CNN’s Democratic presidential debate how a self-proclaimed socialist could hope to be elected to the White House, he gave the answer he usually gives: Socialism has been wonderful for the countries of Scandinavia, and America should emulate their example.

“We should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people,” Sanders said. When the moderator turned to Hillary Clinton, she agreed that America has to “save capitalism from itself” and that, yes, Scandinavia is great. “I love Denmark,” declared Clinton. It was the only time in the debate a candidate uttered the verb “love.”

Liberals have had a crush on Scandinavia for decades. “It is a country whose very name has become a synonym for a materialist paradise,” observed Time magazine in a 1976 story on Sweden. “Its citizens enjoy one of the world’s highest living standards. . . . Neither ill health, unemployment nor old age pose the terror of financial hardship. [Sweden’s] cradle-to-grave benefits are unmatched in any other free society outside Scandinavia.” In 2010, a National Public Radio story marveled at the way “Denmark Thrives Despite High Taxes.” The small Nordic nation, said NPR, “seems to violate the laws of the economic universe,” improbably balancing low poverty and unemployment rates with stratospheric taxes that were among the world’s highest.

Such paeans may inspire Clinton’s love and Sanders’ faith in America’s socialist future. As with most urban legends, however, the reality of Scandinavia’s welfare-state utopia doesn’t match the hype. [...]

The rest of the article goes into detail about how Scandinavian prospered in spite of socialism, not because of it. How socialism nearly destroyed their prosperity, and how they have spend years rolling back welfare and taxes, and re-introducing free market reforms. How much of the success of Scandinavian countries has to do with who they are:

[...] The real key to Scandinavia’s unique successes isn’t socialism, it’s culture. Social trust and cohesion, a broad egalitarian ethic, a strong emphasis on work and responsibility, commitment to the rule of law — these are healthy attributes of a Nordic culture that was ingrained over centuries. In the region’s small and homogeneous countries (overwhelmingly white, Protestant, and native-born), those norms took deep root. The good outcomes and high living standards they produced antedated the socialist nostrums of the 1970s. Scandinavia’s quality of life didn’t spring from leftist policies. It survived them. [...]

Read the whole thing, it's short and it gets to the point, with many embedded links to back up what it says.

BTW, I've no objections to looking at Scandinavia as a model, so long as we look at everything, their successes and their failures. We could learn a lot from both of those. If some things they've done were successful and could be adopted by us, so be it. It's just the sweeping generalizations based on fantasy that I'm leary of. Read the whole article. Why adopt policies from the Scandinavians that they themselves have discarded as unworkable? Even policies that work for them in their largely homogenous culture, may not necessarily transplant to ours. When looking for role models, let's keep it REAL, shall we?
     

China's growing pains

China’s economy is in big trouble, but it isn’t collapsing

[...] It has indeed been a brutal day in Chinese markets — and a very, very bad summer. But, while the plunge in China’s stock exchanges Monday and Tuesday signals big trouble, it does not mean things are about to collapse.

The problem is that investors seem to be reading what is happening in China’s highly volatile equity markets as a signal of the state of the economy as a whole — a mistake, experts say.

The two are linked, definitely, but not as much as those outside China seem to imagine. And the overall economy, though struggling mightily, is still showing some signs of life.

“Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China’s economy,” Julian Jessop, chief global economist at Capital Economics, wrote in a note to clients Monday. “The recent data from other major economies have generally been good and there is little to justify fears of a major global downturn.”

[...]

China knows it needs to undergo a fundamental economic transition, moving away from pumping money into heavy industry, infrastructure investment and the property market, and toward services, consumer spending and tech — a shift that will bring slower growth.

The government understands this and has moved to temper expectations, calling slower growth the “new normal” and vowing to let markets play a “decisive” role in the years ahead.

The trouble is, authorities seem unwilling or unable to let the “new normal” take hold. Their efforts at reform have been piecemeal and halting — they took steps on the currency, for instance, but have yet to move ahead with promises to truly shake up state-owned enterprises.

When the stock market started to slide this summer, the government stepped right in, turning to a series of extraordinary measures, including forcing big investors to buy stock and freezing initial public offerings.

This week, it has taken a more hands-off approach, so far steering clear even as the markets tanked.

The lack of a clear strategy has rightly spooked investors. “It’s a matter of confidence,” said Wei Wei, an analyst at Huaxi Securities in Shanghai, on Tuesday. “China’s economy is not really as bad as people imagine, but people are overreacting. The decline of the stock market reflects people’s expectations.”

Indeed, the picture is not altogether bleak.

[...]

Also lost amid the talk of collapse is the fact that, despite real and worrying problems, China’s economy is still making gains.

There is a debate about how fast China is growing — the government predicts 7 percent GDP growth, but some experts believe the true figure could be as low as 4 or 5 percent. Even if the figure is near the lower end of that range, it is growing still.

China’s industrial sector is struggling badly, but there have been positive signs in terms of services and consumption — the very sectors China hopes to develop.

The latest data show the services sector has become the biggest driver of economic growth in China, expanding 8.4 percent in the first half and accounting for 49.5 percent of GDP, according to government statistics — which, while not perfect, are generally thought to give a sense of trends.

China’s retail sales grew 10.5 percent year on year to 2.43 trillion yuan, or $383.8 billion, in July, slightly down from 10.6 percent growth recorded in June. In the first seven months of this year, retail sales grew 10.4 percent, according to the National Bureau of Statistics.

On Monday, Apple’s chief executive Tim Cook weighed in, saying in an e-mail to CNBC’s Jim Cramer that, from his perspective, things are still looking good.

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August,” he wrote. “Obviously I can’t predict the future, but our performance so far this quarter is reassuring.” [...]

Desperate attempts to control the economy stifle free market forces that could work for them. It's a learning curve they are climbing. Read the whole thing for embedded links and more.
*

     

Can China Change? A Lot?

Why China will never be as rich as America

[...] The odds are against China ever becoming a rich nation by U.S., European, or Japanese standards. Since World War II, South Korea is the only large country to get rich for the first time. Once promising up-and-comers like Argentina and Thailand have fallen victim to the "middle-income trap," stuck in an economic halfway house between poverty and first-world wealth. China is a likely addition to that list, according to my AEI colleague Derek Scissors:

It would not be unusual if there were cities in China with income levels similar to, say, France. It would be highly unusual for China as a whole to reach French levels of income. … The single most likely result is that China will share the fate of many other economies and fall far short of being wealthy. [AEI]

That's why the Chinese Professor ad was actually pretty stupid. It imagined an American economy that eventually loses out to China's because Uncle Sam embraces big government. But it is actually China that is increasingly favoring state intervention over market reforms as the path to greater national prosperity. And it isn't working out so well for them. China needs to shrink the state sector if it is to have any chance of generating broad-based wealth. And if a more market-driven capitalism drives a new era of economic growth for China, it also means a China where there is a lot more economic freedom — and probably political freedom, too — than exists today. And that would be a great thing for global prosperity and peace — not something for economic populists to rage against.

To quote Ronald Reagan, "Never say never." If the state sector backs off enough to allow market-driven growth, and that resulted in more political and economic freedom, we could see very big changes in China indeed. Read the whole article for embedded links and more.

     

Future-shock, accelerated?

Is the pace of technology suddenly accelerating? A case can be made for it:

The Acceleration of Acceleration: How The Future Is Arriving Far Faster Than Expected

One of the things that happens when you write books about the future is you get to watch your predictions fail. This is nothing new, of course, but what’s different this time around is the direction of those failures.

Used to be, folks were way too bullish about technology and way too optimistic with their predictions. Flying cars and Mars missions being two classic—they should be here by now—examples. The Jetsons being another.

But today, the exact opposite is happening.

Take Abundance. In 2011, when Peter Diamandis and I were writing that book, we were somewhat cautious with our vision for robotics, arguing that we were still ten to fifteen years away a major shift.

And we were wrong.

Just three years later, Google went on a buying spree, purchasing eight different robotics companies in less than six months, Amazon decided it was time to get into the drone delivery (aka flying robots) business, and Rethink Robotics released Baxter (a story explored in my new release Bold), the first user-friendly industrial robot to hit the market.

Baxter was the final straw. With a price tag of just $22,000 and a user-friendly interface a child could operate, this robot is already making the type of impact we were certain would show up around 2025.

And we’re not the only ones having this experience.

Earlier this year, Ken Goffman—aka RU Sirius—the founder of that original cyberpunk journal Mondo 2000 and longtime science, technology and culture author—published Transcendence, a fantastic compendium on transformative technology. Goffman has spent nearly 40 years working on the cutting edge of the cutting edge and is arguably one of a handful of people on the planet whose futurist credentials are truly unassailable—yet he too found himself way too conservative with his futurism.

You really have to stop and think about this for a moment. For the first time in history, the world’s leading experts on accelerating technology are consistently finding themselves too conservative in their predictions about the future of technology.

This is more than a little peculiar. It tells us that the accelerating change we’re seeing in the world is itself accelerating. And this tells us something deep and wild and important about the future that’s coming for us.

So important, in fact, that I asked Ken to write up his experience with this phenomenon. In his always lucid and always funny own words, here’s his take on the dizzying vertigo that is tomorrow showing up today:

[...]

Read the whole thing, for embedded links and more examples of this phenomena, and what it means for the future.

It a way, this also relates to this article: Welcome to the Failure Age!, that I blogged about recently. It's about the relationship between technological advancement and the evolution of economics and the ways both shape our societies. About how technological advancements cause failures of older technologies, and how that causes massive disruptions in the workforce and economies, locally and globally.

Our societies are struggling with ways to deal with that, and now that the pace of change is accelerating (according to both of these articles) it's more important than ever to understand this technological/economic relationship, and how we may cope with the many possibilities it's creating in the near future.

I really recommend this article; it's not pessimistic! I think it identifies the dynamics involved very well, and is optimistic that we can find ways to adapt, if we remain flexible and adaptable, and able to change with the changes. If we can, many good things may become possible.

     

How it all works, and where it's taking us

I'm talking about the evolution of economics; how it started, where we were, and where it's all going. I found this article to be intelligent, stimulating and exciting:

Welcome to the Failure Age!

[...] An age of constant invention naturally begets one of constant failure. The life span of an innovation, in fact, has never been shorter. An African hand ax from 285,000 years ago, for instance, was essentially identical to those made some 250,000 years later. The Sumerians believed that the hoe was invented by a godlike figure named Enlil a few thousand years before Jesus, but a similar tool was being used a thousand years after his death. During the Middle Ages, amid major advances in agriculture, warfare and building technology, the failure loop closed to less than a century. During the Enlightenment and early Industrial Revolution, it was reduced to about a lifetime. By the 20th century, it could be measured in decades. Today, it is best measured in years and, for some products, even less. (Schuetz receives tons of smartphones that are only a season or two old.)

The closure of the failure loop has sent uncomfortable ripples through the economy. When a product or company is no longer valued in the marketplace, there are typically thousands of workers whose own market value diminishes, too. Our breakneck pace of innovation can be seen in stock-market volatility and other boardroom metrics, but it can also be measured in unemployment checks, in divorces and involuntary moves and in promising careers turned stagnant. Every derelict product that makes its way into Weird Stuff exists as part of a massive ecosystem of human lives — of engineers and manufacturers; sales people and marketing departments; logistics planners and truck drivers — that has shared in this process of failure.

Innovation is, after all, terrifying. Right now we’re going through changes that rip away the core logic of our economy. Will there be enough jobs to go around? Will they pay a living wage? Terror, however, can also be helpful. The only way to harness this new age of failure is to learn how to bounce back from disaster and create the societal institutions that help us do so. The real question is whether we’re up for the challenge.

[...]

The original age of innovation may have ushered in an era of unforeseen productivity, but it was, for millions of people, absolutely terrifying. Over a generation or two, however, our society responded by developing a new set of institutions to lessen the pain of this new volatility, including unions, Social Security and the single greatest risk-mitigating institution ever: the corporation. During the late 19th century, a series of experiments in organizational structure culminated, in the 1920s, with the birth of General Motors, the first modern corporation. Its basic characteristics soon became ubiquitous. Ownership, which was once a job passed from father to son, was now divided among countless shareholders. Management, too, was divided, among a large group of professionals who directed units, or “subdivisions,” within it. The corporation, in essence, acted as a giant risk-sharing machine, amassing millions of investors’ capital and spreading it among a large number of projects, then sharing the returns broadly too. The corporation managed the risk so well, in fact, that it created an innovation known as the steady job. For the first time in history, the risks of innovation were not borne by the poorest. This resulted in what economists call the Great Compression, when the gap between the income of the rich and poor rapidly fell to its lowest margin.

[...]

For American workers, the greatest challenge would come from computers. By the 1970s, the impact of computers was greatest in lower-skilled, lower-paid jobs. Factory workers competed with computer-run machines; secretaries and bookkeepers saw their jobs eliminated by desktop software. Over the last two decades, the destabilizing forces of computers and the Internet has spread to even the highest-paid professions. Corporations “were created to coordinate and organize communication among lots of different people,” says Chris Dixon, a partner at the venture-capital firm Andreessen Horowitz. “A lot of those organizations are being replaced by computer networks.” Dixon says that start-ups like Uber and Kickstarter are harbingers of a much larger shift, in which loose groupings of individuals will perform functions that were once the domain of larger corporations. “If you had to know one thing that will explain the next 20 years, that’s the key idea: We are moving toward a period of decentralization,” Dixon says.

Were we simply enduring a one-time shift into an age of computers, the adjustment might just require us to retrain and move onward. Instead, in a time of constant change, it’s hard for us to predict the skills that we will need in the future. Whereas the corporate era created a virtuous cycle of growing companies, better-paid workers and richer consumers, we’re now suffering through a cycle of destabilization, whereby each new technology makes it ever easier and faster to create the next one, which, of course, leads to more and more failure. [...]

It's difficult to choose excerpts, because the whole thing is so good, and makes more sense read as a whole. Unlike the comments from the Davos forum, this goes into a lot more depth and demonstrates a greater understanding of the larger picture, the entire process. It's great to see that some people actually are paying attention. This is brilliant, a must read!

Hat Tip for the link above, from: You have to fail to move forward
     

Russian Economics in the Global Economy

It what's bad for Russia, bad for us too? In our global economy, we're all connected:

The ruble's collapse is disastrous for Putin - and bad for you too

[...] Given President Vladimir Putin’s status as the West’s new bogeyman, the temptation to rejoice in the abrupt collapse of his regime’s economic clout is acute. Many will want to congratulate themselves at the success of economic sanctions, the aim of which was to punish Putin for his annexation of Crimea and its covert sponsorship of a civil war there.

They shouldn’t get carried away.

For one thing, it doesn’t make Russian concessions on Ukraine any more likely: the worse the economic pressure, the more the Kremlin’s propaganda will drum home the message that it is the Evil West, denying Russia its holy Crimean birthright, that is to blame. Opinion polls suggest that the vast majority of Russians still accept this version of events.

As such, Ukraine will remain a running sore, infecting both the European economy and, through it, the world’s. Moreover, Ukraine itself is on the verge of a default that will send shock waves through European and global financial markets, amplifying the effect.

A financial crisis in Russia would have much larger negative consequences than a Ukrainian one: western banks (mainly European ones) will have to write off more loans, western companies will have to write off investments. And that’s even if contagion doesn’t spread to other vulnerable emerging markets such as Indonesia or Brazil, both big recipients of western investment.

For the moment, the signs are that Putin is gambling on the oil market turning round, trusting to the legendary endurance of the people while his government keeps the plates spinning as long as it can.

In the meantime, the loyal will be taken care of. Covert bailouts to the country’s biggest banks from the country’s rainy-day fund are already getting more frequent. VTB and Gazprombank, two lenders that are “too-big-to-fail”, have already had their capital levels topped up.

But that is nothing compared to the egregious piece of money-printing that was agreed last week, when the central bank agreed to lend money against 625 billion rubles (still over $10 billion, even after Monday’s mayhem) of bonds freshly printed by Rosneft, the oil company headed by Putin confidant Igor Sechin. The aim is to let Rosneft hoard its export dollars and meet a $10 billion loan repayment later this month (and another $4 billion in February).

The realization that Rosneft, one of the biggest players on the foreign exchange market, would be buying far fewer rubles with its export dollars appears to have been one of the reasons for the ruble’s drop Monday (the failure of the central bank’s half-hearted rate hike and intervention last week also being partly responsible).

If the central bank shows anything like the same generosity to other companies, then the ruble’s debasement will be complete. The central bank now estimates that the economy will shrink 4.5% next year if oil stays at $60/barrel, and that is something that would certainly trigger a wave of corporate defaults.

Unless the ruble bounces back sharply, inflation is heading much, much higher than the 10% the CBR is already forecasting. Specifically, food, which makes up over 30% of Russian disposable income, is going to get more expensive (Russia imports over 40% of its food and has made a rod for its own back by banning relatively cheap produce from the E.U.).

Moreover, since over 80% of retail deposits are now held in rubles, devaluation means that the savings that Putin’s voters have accumulated as they came to trust their own currency over the last 14 years will be devastated. Already Monday, the yield on the 10-year bonds of a government that hasn’t run a deficit in 14 years hit 13%–anything but an expression of trust.

This is a recipe for social instability far greater than the tame, middle-class, metropolitan protests at Putin’s tainted election victory in 2012.

But what does an authoritarian leader do in such a situation? Back down or crack down? There is no evidence from this year to suggest Putin has suddenly become the backing-down kind. Repression seems the likelier option. If that doesn’t work, then doubling-down with another foreign policy adventure to distract from domestic problems hardly seems fanciful any more: in the summer, Putin cast doubt on the statehood of neighboring Kazakhstan, which doesn’t have the NATO guarantee that the Baltic States enjoy.

Either way, the consequences are too miserable to contemplate, both for Russia and for the world in general. [...]

Something to look forward to in the New Year? See the original article for embedded links and more.

     

Not another NYT opinion piece on "inequality"?

Yes. And no. It starts by talking about Thomas Pikety's book "Capital in the Twenty-First Century", which everyone is talking about and buying, but also not actually reading, apparently:

An Idiot’s Guide to Inequality

We may now have a new “most unread best seller of all time.”

Data from Amazon Kindles suggests that that honor may go to Thomas Piketty’s “Capital in the Twenty-First Century,” which reached No. 1 on the best-seller list this year. Jordan Ellenberg, a professor of mathematics at the University of Wisconsin, Madison, wrote in The Wall Street Journal that Piketty’s book seems to eclipse its rivals in losing readers: All five of the passages that readers on Kindle have highlighted most are in the first 26 pages of a tome that runs 685 pages.

The rush to purchase Piketty’s book suggested that Americans must have wanted to understand inequality. The apparent rush to put it down suggests that, well, we’re human.

So let me satisfy this demand with my own “Idiot’s Guide to Inequality.” Here are five points: [...]

I can't repeat the five points, without reproducing the whole article here, so you'll have to follow the link.

I don't normally post about these kinds of articles, because they are often filled with "class warfare" rhetoric and drivel. And this NYT opinion piece has it's share of that as well. It's ironic that the author chooses to call it the "idiots guide", when I think some of the things he says are pretty idiotic (especially the option about rich people and expensive cars. Isn't it possible that rich people by expensive cars, because they like them and can afford them? Duh!).

But the article does have some moderate views, and does have a lot of embedded links to back up it's arguments. So while I may not agree with the article as a whole, it doesn't mean that it doesn't touch on some interesting facts or ideas. I'm not against rich people. But if indeed only the rich are getting richer, it's worth looking at why, and understanding why and how. I don't believe in communist revolutions redistributing the wealth. But a rising tide that lifts all boats IS preferable to one that only lifts yachts. Most reasonable people would have no argument with that.

     

The evolving demos, raised living standards

Why did the British surge ahead during the industrial evolution? Would you believe, it was awareness of numbers, and patience?

How learning to pass the marshmallow test explains global economic evolution

[...] Paul Solman: So we get to 1800 and now suddenly things become dramatically different. If you’ve got a line for growth per person that’s basically horizontal along a timeline of all human history, suddenly after 1800 it looks like it’s going straight up?

Greg Clark: Yes. Sometime around 1800 this dominant feature of the world up until then, which was very slow technological advancement, changed, and we moved to a world where technological advancement was systematic, expected, occurring all the time. But I should emphasize that that change is actually much more gradual than that 1800 date would suggest.

There was a break at some point between, say, 1600 and 1900 from this Malthusian world to the modern world, and that, for the advanced economies, just dramatically changed their nature.

What I want to emphasize here is the bizarre and puzzling nature of the Industrial Revolution, and it’s important to understand that this is one of the intellectual puzzles of history that’s on a par with the biggest puzzles in physics, or in astronomy, even though people generally don’t appreciate this. And perhaps the reason is that modern economists have constructed a false history of the world in their minds. They tend to assume that since high-income modern economies have certain economic features –

Paul Solman: Free markets, rule of law…

Greg Clark: …stability, peace, open government, and that low-income modern economies tend to have violence, market interference, restrictions — what must be the case is that the pre-industrial world suffered from all of these problems, and that then somehow people stumbled on the right institutions, and then growth occurred.

Paul Solman: And by “institutions” you mean markets, the sanctity of contracts?

Greg Clark: That’s right. Property rights, markets, representative government, limitations on the power of government. And it does turn out that England, which was in the vanguard of this movement, was a politically stable society with limited democracy, and very little government interference.

However, when you study the long history of the pre-industrial period, it becomes apparent that, for example, if you go back to 1300, England already had all the institutions you needed for modern economic growth.

England had a government tax rate that averaged 1 percent. It had, for hundreds of years, zero inflation. It had no government debt. It had absolute security for most people of their property rights. Most markets were free. For hundreds and hundreds of years, England had everything it needed for modern growth. If you go back to ancient Greece or ancient Rome, or probably even ancient Babylon, they had institutions enough for getting growth.

Paul Solman: We have the tablets from ancient Babylon because they were incised in clay, and there were all kinds of contracts.

Greg Clark: They had home mortgages, they had rental contracts, they had labor contracts, they had urban societies.

But, says Clark, the Babylonians obviously didn’t have modern economic growth. Nor did the Greeks, the Romans, the Chinese or anyone else, even though they had many of the institutions that economists credit with the advent of prosperity.

Greg Clark: It’s the dominant paradigm in modern economics. The idea in this is that economics has an amazing power. Institutions – I mean, it’s just the rules of the game in any society. If we don’t like the rules we have, why don’t we just change them? And then apparently, we could have endless growth.

That I think, is what gives economics its power and its appeal. But that’s what I’m trying to argue against.

I think the key was that there is very strong evidence that people were changing through this long Malthusian interval. Human nature seems to have been changing. It may well be culturally. It’s impossible to rule out that it’s actually genetically. What we find, if we look back at the earliest societies, is that people tended to be violent, impulsive, impatient. They didn’t like to work.

When we get to societies like England on the eve of the Industrial Revolution, you can see that people are accumulating capital in ways that they never did before. There’s much less violence – ordinary day-to-day violence — in the society.

People’s levels of education have expanded enormously. They are much more aware of numbers.

The upper classes in ancient Rome mostly didn’t know what age they were. On their tombstones they would record ages that were just fantastical – 120 in a society where life expectancy at birth was 25 to 30. No one seems to have thought: “This is crazy.”

You also get in these early societies people giving numbers for battles that just make no sense in terms of what we now know about history.

Paul Solman: What’s an example of that?

Greg Clark: They typically quote 80,000 for some reason as a standard number, and it just seemed to mean “big.”

There’s a case in medieval England where someone testified in Parliament to having fought in a battle in his youth, which occurred more than 100 years earlier. No one interrupted to say, “What are you talking about?”

And so we really see big changes in terms of work effort, patience, interest rates in very early societies at astonishing levels. If you go back to ancient Babylon, your house mortgage would cost you in real terms 20 to 25 percent interest rate per year.

These were societies that offered fantastic profit opportunities – profit opportunities that even venture capitalists now would die for. They were available to everyone, and no one took them.

In ancient Greece, your standard return from completely safe investments was 10 percent. But on the eve of the Industrial Revolution in England, the rate is down to 4 percent. There’s just a fundamental change in people’s psychology. What that implies is that people were historically very impatient.

Paul Solman: So you mean the time value of money — the value of waiting — has simply gone down as time has gone on?

Greg Clark: Yes. There’s very clear signs that with risk-free investments, the amount you have to pay people to wait declines very dramatically. We know, in the modern world, that people vary in their degree of impatience and how much they have to be paid.

I have three children, and they vary very significantly across that factor.

We also know in the modern world that psychologists were able to test four-year-olds and say, “You can have one marshmallow now or two marshmallows if you wait for a few minutes.”

There’s a bunch of kids that have to have the marshmallow, and others that just have this different psychology where they can wait. It turns out that’s a very good predictor of how they’ll do later in life. It seems to be a fundamental feature of peoples’ personalities: how willing they are to wait for gratification.

There seems to be this possibility that on a world scale, this was actually changing as we moved from hunter-gatherer society, to 1800. [...]

I'm sure one reason that people were "historically impatient", was that they didn't live very long!

Read the whole thing for embedded links and video.

     

Where Keynes got it wrong, and why

And what we might glean from the "why":

Paul Mason: what would Keynes do?
The revolution in IT and how it is transforming our world in ways that even economists are struggling to understand.

In 1930, while the world was still reeling from the impact of the Wall Street crash, John Maynard Keynes published a remarkable essay: in “Economic Possibilities for Our Grandchildren” he imagined a world where, as he put it, mankind’s “economic problem” has been solved. By 2030, barring unforeseen wars and given the population did not rise too fast, a combination of technological advance and rising wealth could leave enough for everybody.

This would be quite a big change, he pointed out, because the entire history of humanity has been determined by there not being enough for everyone.

“For the first time since his creation,” Keynes wrote, “man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

[...]

Keynes imagined and fought for a society based on liberalism and aesthetics. The market would eventually provide for all and create a confident, socially adventurous leisure class, whose purpose was to understand and create beauty – and to work as little as possible. That view had been dented by the First World War and would now be shattered by the Depression. So the “grandchildren” essay stands as almost the last utterance of Keynes’s pre-Depression world-view.

[...]

So, as with all insights into the future, Keynes’s essay is full of misunderstandings about the present. (In 1930 the great wave of bank insolvencies that triggered the Depression lay 12 months ahead. Herbert Hoover was in the White House, no developed country had yet left the gold standard, Ramsay MacDonald was still in Downing Street and the Nazis held just 12 of the 491 seats in the Reichstag.) Its underlying tone is: don’t worry, these are growing pains; the market will – with the help of governments – create the solution. And that was wrong.

Yet there is something breathtakingly far-sighted about the “grandchildren” essay. At its heart is the proposition that one day:

• capitalism will grow into something else;

• if that happens the cause will probably be technology;

• we will have a major psychological problem adjusting our lifestyles to a situation where money is not important;

• the love of money will come to be seen as a disease;

• economics will become as mundane as dentistry.

Keynes looks into the future using three yardsticks: the rate of technical innovation, the growth of population and the growth of capital through compound interest. He estimated that productivity would safely grow at least 1 per cent per year, and that capital would grow by 2 per cent per year. If so, it was safe to assume that by 2030 the standard of living in advanced countries could be four to eight times what it was in 1930 – and if technology improved faster, eight times could be an underestimate.

[...]

The idea was that technological progress would create fresh demand, so that even as the price of today’s goods got cheaper (because of productivity) there would always be new, more complex human needs created that require higher-valued things and a higher-skilled workforce to create them. That has been capitalism’s get-out-of-jail card for 200 years, confounding Malthus, Ricardo and Marx, each of whom in his own way believed there were limits to capital.

It happened spectacularly in the Progressive Era, the second industrial revolution, when Victorian-era cities were suddenly populated with Arts and Crafts-style pubs, cinemas, libraries, automobiles, electric lighting . . . prompting Virginia Woolf to declare that “on or about December 1910, human character changed”. And sure enough human character is changing again, under the impact of technology. This third industrial revolution is having a different effect, however: certainly there are more complex needs being created, but it’s not obvious how they will be commercialised.

“Information wants to be free,” said the hippie-ideologue Stewart Brand – to which the open-source movement added: “free as in freedom”. If physical goods are getting cheaper the drivers of demand are of course energy (which has to get dearer) or services. But services, too, can be automated. And so what we may be left with is the nightmare the French writer André Gorz envisaged: that just as it tried to privatise water in the 1980s, capitalism is forced to privatise and commodify simple human interaction. That just as we have sex work now, we might have affection work, sympathy work, anti-loneliness work in the future.

[...]

The present situation breeds not only a widening inequality of wealth but an inequality of power not seen in Keynes’s time except in Fascist Italy or Stalin’s Russia. I think it may all end in tears again – with unchecked oligarchic governments such as those of Vladimir Putin and Recep Tayyip Erdogan repressing their population with tear gas and arbitrary detention, while the democratic-world elite stands by, once again convinced that its economic interest lies in supporting dictators against their own people, and increasingly prepared to use repression, surveillance and arbitrary power against their own populations.

If we avoid this dire outcome, it will because the forces for good, for understanding and knowledge and restraint are also being strengthened by technology. I think we should imagine new technology creating the world of abundance Keynes longed for, but it is likely to be decoupled from the question of pure GDP growth and compound interest.

It won’t happen by 2030. It will not be the transition Marxists imagined, led by the state suppressing market forces, but a transition based on the controlled dissolution of market forces by abundant information and a delinking of work from income. I call this – following economists as diverse as Peter Drucker and David Harvey – post-capitalism. In making it happen, the main issue is not economics but power, and it revolves around who can envisage and create the better life.

Keynes’s critique of Marxism was that by basing itself on the working class it asked too much of the intelligentsia. He wrote in 1925: “How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above bourgeois and the intelligentsia, who, with whatever faults, are the quality of life and surely carry the seeds of all human achievement?”

Well, now (thanks to education and technology), we have a mass intelligentsia: yes, for sure, spoon-fed tick-box learning on degree courses whose intellectual level Keynes would have scorned. But they have shown themselves willing to stand somewhere between the mud and the fish, and able to create science and art and ideas that make this a thrilling time to be alive. It was they who launched the Arab spring, the Quebec spring, Occupy, Taksim Square and the Russian democracy movement.

When I look at the picture of the miner’s relative and the man kicking him, I find it hard to prefer the fish to the mud. I suspect that Keynes, placed for one hour in a Rolex store, or in any of the yachting ports where British politicians frequent the vessels of Russian oligarchs, might also begin to find this whole “fish v mud” thing not so useful. But we have gone beyond the proletariat and the bourgeoisie. We have an educated demos alongside an underclass, and we are all toiling in a social factory where every act of production, consumption and leisure sucks us into a system of value creation based on debt, finance, monopoly.

By 2030, according to the Oxford Martin School, 47 per cent of all US jobs, mainly in retail and services, will be automated. Automation used to mean the replacement of physical labour by machines; now it means the replacement of mental labour by software – and software is just a machine that never wears out and costs nothing to reproduce. Unless whole new industries based on whole new sources of economic demand grow up, the purchasing power of the majority will fall; and ultimately there is only so much money you can print, and only so many asset bubbles you can stimulate, until it comes to a full stop.

Keynes imagined a future where rising wealth led to falling inequality. Instead, economic wealth has grown more slowly than he imagined but physical and information wealth has grown faster and begun to detach itself from the value system. The moment is coming where we have to recognise this and redesign society as boldly as Keynes’s generation did in the mid-1940s.

I think a modern-day Keynes would be obsessed with how to decouple work from income, production from price, organisation from ownership. We know what he achieved in practice: a workable system that revived global capitalism. But he also dreamed of something better than a system based on the pursuit of money. [...]

Yeah, dreamed is exactly the right word. And what is this: "That just as we have sex work now, we might have affection work, sympathy work, anti-loneliness work in the future." WTF?

This article does have some interesting parts, and parts of it seem to be backed up with some pretty good arguments and observations. But it's got it's weak spots too.

The author says "Even as we grapple with the aftermath of our own Wall Street crash, we are facing a new problem: the rise of information goods whose abundance is probably the indirect cause of – and solution to – our current state of low growth, high inequality and growing social unrest." And tries to explain why. Some of his arguments are convincing. But others, not so much. And I have to say, I'd like to hear more about how the abundance of information goods is "the solution to".

He does an excellent job of explaining the failures of Keynes predictions, but then seems to go on praising Keynes's vision as some how achievable anyway, due to some vague "post-capitalist" society that we need to become.

I don't object to the discussion of this. But I've heard plenty of people fantasize about a "post-capitalist society", yet they never show you the beef; it just sounds life a fantasy. And since Keynes HAS been proven wrong about so many things, you have to wonder if it isn't a mistake to keep holding on to the future-fantasies he envisioned as well?

This article identifies a lot of problems, but it seems unfirm and vague about solutions. I can't get excited or enthusiastic about vague references to a "post-capitalist" society, without it being explained how such a society would actually work. It's been tried before, with dismal, even deadly, results. So any talk about a "post-capitalist" society should, IMO, provide the details and prove itself to be something other than another deadly experiment in social engineering.


   

Interesting Links about Aging, Working, Retirement or not Retiring

An 8.3 Percent Return for Life, Guaranteed: Real or Imagined?

[...] In finance, the word "annuity" refers to a series of payments made to a person (called the "annuitant") for life or for a set number of periods. In this post we refer to a fixed, life annuity, a plain vanilla annuity that will guarantee a set income each month for the rest of your life, no matter how long you live or what dumb mistakes you make along the way. If this guarantee looks familiar, it should, since it is pretty much what we get from Social Security as well as from a traditional "defined benefit" pension -- if we are lucky enough to have one. Both are forms of life annuities because both pay until you die. [...]

I've been curious about annuities. This article has a large question and answer section, which explains a lot.

New Adventures for Older Workers
Has lots of facts, figures and links about the subject matter; retirement, coming out of retirement, working indefinitely, making it in rural areas, all sorts of things. Videos, with interviews of various people in various situations.

How Social Security Pays You to Work Forever

[...] How long do I intend to "work"? Hopefully, right up to my last day on earth. And, as if I didn't have enough good reasons to work, Social Security, it turns out, adds a significant incentive for doing so. The longer you work, the larger your Social Security benefits. This is due to Social Security's "Recomputation of Benefits" provision. Here's how it works -- for all of us older cowpokes who remain in the saddle indefinitely.

Each year you work, you add to your earnings record, leading Social Security to automatically recalculate your benefits. If you are interested, here are the gory details.

In a nutshell, Social Security averages your highest 35 years of earnings to calculate your Average Indexed Monthly Earnings or AIME. Then it plugs your AIME into a formula that figures out your full retirement benefit, called your Primary Insurance Amount (PIA). What benefits you can get for yourself and your spouse (including your ex-spouse(s) and your children, if they are young enough or are disabled) is all pegged to your PIA.

From age 16 on, Social Security considers all your earnings, up to a ceiling that rises from year to year. It then indexes, based on historic wage growth, all earnings through the year you turn 60.

In other words, Social Security adjusts past earnings upward to account for the growth in the economy. But after age 60, you get credit for your earnings without any adjustment at all. So imagine that there's a sudden surge in inflation and wages after age 60 skyrocket. They're going to look spectacular compared to your wages of the past, even though they've been indexed. And here's the kicker. Social Security bases your benefits on your highest 35 years of earnings.

So now imagine that age 30 was the lowest of those 35 years and you made, say, $40,000, even after indexing. But now inflation takes off and you're suddenly making $200,000, even though $200,000 ain't what it used to be.

But for your Social Security benefits, this is a bonanza. You're suddenly being treated as if you were really earning a lot more, and thus deserving of much higher benefits. So, for every year that your post-60 earnings exceed the lowest of the previous 35 years, bingo! You'll raise your Social Security check (or checks, if your dependents are also collecting). [...]

He continues on, using himself and his earnings as an example. Wow.

Recommendation No. 1 for a Secure Retirement: "Age in Place"

[...] Owning an accessible home in which we can age in place is important to keeping our future core expenses down for many reasons. First, and most obvious, owning a home outright in retirement greatly reduces our need for income since we no longer have to pay the mortgage.

In the United States, paying as much as 40 percent of your income for housing has been considered normal. Many of us did this when we were young with growing families and growing incomes. Think of how much better we could have done if we had owned our homes, outright, through our adult lives. In many cases, by not making mortgage payments, our housing-related expenses could have been cut by 75 percent or more.

Contrary to what others may have told us, our standard of living in retirement is not based on what we make or what we spend. Rather, it is based on what we spend and the benefits we get from the things that we own outright such as housing, cars, appliances, furniture and clothing. Economists call the income that we get from owning our homes and other possessions outright, and not having to pay rent on them, "implicit income." Since we already own so much of what we use in retirement (home, car, furniture, appliances, clothes), the income that we will need to comfortably support ourselves in retirement may be far, far less than the income we earned while we were working and paying for all of these things. So much for fear-mongers who insist that we must have cash retirement income equal to 70 percent of our pre-retirement income! That is just not true.

A second major benefit of owning, outright, an age-in-place home is that it is a wonderful hedge against inflation. Some of our older readers will remember the double-digit inflation of the late 1970s and early 1980s, where costs (including the costs of renting a home) could double in six or seven years. If we own our retirement home outright, or have a fixed-rate mortgage, which I will deal with below, most of our housing costs are protected against inflation and the value of the home is also likely to increase. While there are other ways of protecting against inflation (see my last column on inflation-protected annuities), the cost of inflation-protection is high. Rather than pay for inflation protection, we can save money by reducing our core expenses that are subject to inflation. Much of this can be done by owning a paid-up, low-maintenance, energy-efficient age-in-place home.

Aside from the financial benefits of reducing cash flow needs and hedging against inflation, another huge saving from having an age-in-place home is likely to be the reduction or elimination of very expensive nursing home costs in the future. With an age-in-place home, an incapacitated spouse or single person may be able to live in a comfortable, familiar environment with some outside help for a long period of time at a fraction of the cost of a nursing home. Staying at home can also reduce the need for increasingly expensive long-term care insurance whose maximum daily benefits are often just $150 or so, a fraction of nursing home costs, leaving patients and their families to make up the huge difference. [...]

The article also goes into reverse mortgages and many other things. A good resource to read.

I'll probably be referring back to many of these links. Good stuff to know.
     

Financial Savvy Peaks at Age 53?

So say some:

Financial Savvy Peaks at Age 53: What to Do When You Get Stupid

[...] Lew Mandell: As we move through middle age, our ability to manage our finances tends to peak, on average, shortly after our 53rd birthday, and declines thereafter. By the time we hit 70, this rate of decline steepens precipitously. This is the opening theme of my new book "What to Do When I Get Stupid."

The relationship between age and financial capability is a function of two offsetting aspects of intelligence. As we get older, experience makes us better able to cope with a variety of familiar problems. This is called "crystallized intelligence." However, past the age of 20, the analytical ability we need to perform new tasks declines steadily. This is called "fluid intelligence." Since the intelligence we gain from experience increases more and more slowly after some three decades of adult experience, our steadily declining fluid intelligence ultimately offsets the gains from experience, causing most of the decline in our mental capacities including financial capability. (Check out Paul Solman's animated explanation of Harvard's economist David Laibson's graph demonstrating this relationship and see Making Sen$e's full segment below.)


At a certain point, declining "fluid intelligence," or our analytical ability, offsets gains in our experiential intelligence, putting our financial decision-making at risk.

Adding to this decline is the beginning of age-related neurological problems including dementia and other types of cognitive impairment. Overall cognitive impairment affects 21 percent of us in our 70s, increasing to 53 percent of those in our 80s and 76 percent of those over 90.

The ability to make investment decisions has been found to peak at about age 70, somewhat later than other types of financial decisions such as those that relate to the use of debt. This is probably due to the fact that many adults focus on their investments only later in life when they have both assets and the time to think about them. Experience with investments tends to come later, thus abilities peak later.

Unfortunately, studies have found that as people get older, their confidence in their abilities to make good investment and insurance choices actually increases as their measured ability decreases, leading to the likelihood of poor outcomes. [...]

The rest of the article talks about what you can do about this, as well as embedded links to other articles with retirement advice.
     

A country without an operating budget

It's US. Since 2009:

1600 Pennsylvania Avenue and 1600 Days Without a Budget

[...] So here’s a little primer on the fiscal State of the Union.

According to the US Debt Clock, we are $16,970,000,000 in debt. The US Debt Clock is an unofficial tally of our excessive spending.

The federal deficit increased by $146 billion in August, as reported by the CBO four days ago. Yet this conflicts with reports from the Treasury Department.

Yet as reported by CNSnews, “According to the Daily Treasury Statements that the Treasury publishes at 4:00 p.m. on each business day, the debt subject to the legal limit has remained at exactly $16,699,396,000,000–or about $25 million below the legal limit–every day since May 17.”

This makes 118 days, with the September 12 report being the most current, that the debt has stayed at $16,699,396,000,000.

Why is this important? The current debt ceiling limit is $16,699,421,095,673.60. According to the debt clock, however, and if CBO reports for June, July, and August were added to the Treasury statements amount since May 17th, we would be way past the debt ceiling limit. In fact, August alone would have crossed the threshold. So what is our current debt?

Incidentally, the reason why Congress even has to consider the question of funding the government or shutting it down past September 30 (the last day of the fiscal year) is that there is no operating budget. The last time the Senate passed a budget was April 29, 2009. Nearly the entirety of Obama’s time as President has been this way. For the Senate to abrogate its basic fiduciary responsibilities in such a major way is unconscionable. [...]

Is "unconscionable" becoming the new "commonplace"? How can the Treasury just "stop" the debt clock at May 17? It makes their daily statements completely meaningless. Ditto the inflation index, which no longer includes the cost of food or fuel. And all this phoney talk about the "approaching" debt ceiling, when we have already passed it. What happened to reality? How many people are actually paying attention?

A household or a business without a budget gets into trouble quickly. Why should a country be any different?
     

The End of Work?

Uh... what exactly does that mean? Depends who you talk to:

Should We Fear "the End of Work"?

[...]  Cornell University's School of Industrial and Labor Relations recently brought together 40 leading economists, policy makers, engineers, bankers, corporate executives, social scientists, philanthropists, journalists and statisticians for a day-long exploration of how technology is shaping -- or misshaping -- the American workplace.

Coming up with answers was not the goal: Cornell's belief was that searching for consensus in a one-day meeting would be futile. Initially, I wondered about the utility of that, given the gravity of the economic challenge facing the country. But it was a good decision. The range of views on what's happening was so wide -- and surprising -- that reaching realistic solutions would have been, well, unrealistic. Precisely because this kind of a meeting has been so rare, the meeting imposed the Chatham House Rule on attendees: we could talk afterwards about what was said, but not about who said it. (I later asked some of those who attended if I could quote them directly; almost all said yes.) If I had to sum up a fascinating day -- well, let's save that for the end, after you've seen the amazing diversity of views on the future of work.

Here's perhaps the fundamental question about what's going on in the American economy as it struggles to recover from the Great Recession: "How is this recovery different from other recoveries?" Or is it?

To put it in economese, is the persistently high level of unemployment a result of cyclical factors (the traditional ups and downs of economic growth) or structural factors (new game-changing technologies, dramatic shifts in the global economy)? The NewsHour has covered this debate several times, including economists duking it out in one recent instance.

From one decades-long leading student of the American economy came a succinct one-liner in favor of cyclicality: "This isn't a jobless economic recovery as everyone insists on calling it; it's simply just not yet a recovery."

In other words, as painful as the waiting certainly is, the economy will heal -- and once again, create jobs -- in time.

"Brace yourselves," countered Eric Brynjolfsson, from MIT's Sloan School, co-author of "Race Against the Machine," a much-talked-about recent book which argues that the introduction of new transformative technologies has only just begun, and that we're dangerously unable to perceive what's actually going to happen. (Brynjolffson was featured in a Making Sen$e broadcast story in 2011.) He added:

"Many of our intuitions about what's coming next are going to fail us. All the disruptions we've been talking about today about the past 10 years, the past 20 years -- as important as they've been and as hard-hitting as they've been for so many people -- are just a small glimmer of the much bigger disruptions that we think are in store for us in the next 10 and 20 years, at least the ones that are related to technology."

Princeton University economist Alan Blinder, who served in the 1990s as vice chairman of the Federal Reserve, took a more measured view. He believes that both cyclical problems and disruptive technological change are at play, along with the changing face of the global economy:

"In terms of the number of jobs, it looks like an awful lot of the problem is cyclical. That's the first problem.

"The second problem is the lagging average wage. Until a few decades ago, India, China, and the former Soviet Union were isolated and not really participating in the world economy. But now they have roughly doubled the world's labor force, in a couple of decades.

"What did they bring to the table? Capital? No. They had almost none. But they had a lot of labor. So, if you double the amount of world labor and you don't change the amount of world capital much, then loosely speaking, the returns to labor are going to go down while the returns to capital go up. And this is about to end. And it's not mainly about technology.

"But then there is the third problem: what's behind the trend toward greater wage inequality? The non-economist in me wants to think about institutions and social norms. Some of the increase in inequality has to stem from changing attitudes in our society. I just don't believe that it's only technology."

The Promise and Perils of a Machine that Can Make Anything

The role of automation in the decline of manufacturing jobs has been front-and-center since the end of the recession. (Well, since the Luddites in the 19th century, but let's move on.) Cornell University's Hod Lipson is one of the country's most prominent experts on the interplay of robotics, IT and manufacturing. Lipson's next book is titled, ominously, "The Promise and Perils of a Machine that Can Make Anything." I found his presentation both powerful and unsettling:

"Machines are better at learning than humans in many different areas. So now the question is, what will they learn and what's the end game?
"Are we talking about the future of jobs in the next five years, 10 years, 50 years or 100 years?

"If you're talking 100 years, there's no doubt in my mind that all jobs will be gone, including creative ones. And 100 years is not far in the future -- some of our children will be alive in 100 years."

Trained years ago as an engineer myself, I get the enthusiasm for technological solutions to manufacturing problems. But given the persistent levels of unemployment, I asked Lipson if the engineering profession didn't have to take a broader view. His answer was blunt -- but also open to the possibility of change:

"In a way, we cannot help ourselves. We try to automate every difficult task that we see. It is rooted in the fact that the mantra of engineering has always been to try to alleviate drudgery and increase productivity -- that was the good thing to do. That's what we still train our students to do.

"But what I'm hearing here is that maybe we should redirect our efforts, and try to solve a new kind of problem. I'm not sure what that problem is. But I'm sure that if you can define what the problem is that we need to solve, then we can start thinking about how to solve it, using the same engineering tools."

Thomas Kochan, the co-director of MIT's Institute for Work and Employment Research, jumped in on that point. Decades ago, MIT was one of the first engineering schools in the country to focus on the public policy implications of engineering innovations. (Full disclosure: I'm an MIT grad). Here's what he had to say:

"Instead of focusing on how do we drive labor out and how do we eliminate variability by standardizing everything, we need the engineering profession to think about the world's big problems, and then to understand that it's the interaction between skills, the way in which we organize our work, and the technology that really drives productivity.

"The engineering profession needs to catch up with the understanding of how technology can be enhancing to society, without just thinking about how it drives out labor, through innovations. I think if we focus more on enhancing human skills, we'd get a lot more societal benefit out of the next generation of technology."

Lipson and the other tech experts took some pointed, albeit well-mannered, heat from people worried that more efficient production is nearly always equated with eliminating human workers. As one participant put it: "optimistically inventing stuff" with too little thought for the social consequences. [...]

There is a lot more, but I can't excerpt the whole article. I can't say what is going to happen, but there is plenty food for thought here.
     

The Literal High Price (or prices!) of QE3

 QE3 Will Further Destroy U.S. Dollar

  [...] The actions of the Federal Reserve have a dramatic impact on the lives of every single American. The central bank essentially controls the value of the money that we have in our pockets. QE1 and QE2 can be blamed in large part for the skyrocketing price of food at the grocery store. The same supply and demand rules apply to money. The more dollars we have in the circulation, the less valuable the money becomes. The Fed is a main reason why it’s costing us more dollars to fill up our gas tank nowadays.

For decades, Rep. Ron Paul (R-Texas) was the lone voice in Washington speaking out against the Federal Reserve. He writes that “the inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money... dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real — the individuals who suffer most from cost of living increases certainly pay a ‘tax.’” QE1, QE2 and QE3 are nothing more than stealing wealth from the people through the hidden tax of inflation.

Our Founding Fathers would surely be outraged by the existence of the Fed. These great men believed in a limited government that was held accountable to the people. The Federal Reserve, which is generally regarded as a quasi-governmental entity, has less oversight than even the Central Intelligence Agency (CIA). The most powerful central bank in the world makes all of its decisions without even a single vote from our elected representatives in Congress.

You can bet that the Fed is up to no good behind closed doors. Due to a provision under the misguided Dodd-Frank financial overhaul law, the Government Accountability Office (GAO) conducted a one-time, watered-down audit of the central bank back in July. It gave the American people their first peek into the central bank’s books but prevented investigators from peering into their deliberations on interest rates and the most crucial transactions of the Fed. We still need to pass a true audit the Fed bill like Ron Paul’s Federal Reserve Transparency Act of 2011 that would require comprehensive audits on a regular basis.

The first ever audit revealed that the central bank “loaned” out $16 trillion at a zero percent interest rate to corporations and banks around the world during the height of the financial crisis. To put that number into perspective, the Gross Domestic Product (GDP)—the value of all economic activity within a country— of the United States is only $14.12 trillion. It’s no wonder that the Fed is desperately trying to protect their privileged secrecy. 
[...]

There is much evidence to demonstrate that the Federal Reserve is a major part of the problem, not the solution:

Fed Up with the Fed?

[...] The policies of this administration make it risky to lend money, with Washington politicians coming up with one reason after another why borrowers shouldn't have to pay it back when it is due, or perhaps not pay it all back at all. That's called "loan modification" or various other fancy names for welching on debts. Is it surprising that lenders have become reluctant to lend?

Private businesses have amassed record amounts of cash, which they could use to hire more people— if this administration were not generating vast amounts of uncertainty about what the costs are going to be for ObamaCare, among other unpredictable employer costs, from a government heedless or hostile toward business.

As a result, it is often cheaper or less risky for employers to work the existing employees overtime, or to hire temporary workers, who are not eligible for employee benefits. But lack of money is not the problem.

Those who are true believers in the old-time Keynesian economic religion will always say that the only reason creating more money hasn't worked is because there has not yet been enough money created. To them, if QE2 hasn't worked, then we need QE3. And if that doesn't work, then we will need QE4, etc.

Like most of the mistakes being made in Washington today, this dogmatic faith in government spending is something that has been tried before— and failed before. [...]

Sowell goes on to show how history is repeating itself.

Owning a business is similar in some ways, to raising a child.  You have to anticipate all of it's needs in advance, and provide for them.   When the economic climate is uncertain, you have to maintain cash reserves to plan to deal with the unexpected, to insure that your business will continue to survive.  The current Administration seems to have no clue about this, just as it has failed to learn the lessons of history.

Germany in the 1920's learned a very hard lesson about Quantitative Easing, as the article at the following link demonstrates, with pictures of the actual currency in the final months. Absolutely horrific:

Quantitative Easing, Weimar Edition

Would it not be better to learn from the mistakes of those who have gone before us, instead of repeating those mistakes ourselves?    

Austerity, Spending, and Economic Growth

Alex Castellanos says Europe hasn't really embraced austerity yet:

Could austerity be the right cure for Europe's hangover?

(CNN) -- I never imagined we would find a no-win question to displace the genre's champ, "Have you stopped beating your wife?" Now, there is contender: "Does austerity work?"

Fareed Zakaria tells us it doesn't, faulting it for Europe's constriction. The problem is not a borderless European financial system, unable to quarantine nations sick with public and private debt. Oh, no, Zakaria writes, "The larger failure, shared across Europe, has been too much austerity."

In the Washington Post, Ezra Klein notes unemployment is "skyrocketing" across Europe and he contends the fault lies in shrinking budget deficits brought by spending cuts and tax increases. Klein tells us this is what austerity looks like "and it can be expected to reduce economic growth."

As the UK slides into a double-dip recession, economist Paul Krugman blames David Cameron's austerity. Borrowing from John Maynard Keynes, he tells us, "The boom, not the slump, is the right time for austerity."

Never mind that spending in Britain is virtually unchanged and other nations in Europe are spending more. Neal Reynolds writes that "austerity," as practiced in Euro27 countries, has actually increased government spending from 46% to 51% of Europe's GDP from 2006 to 2010.

Greece, where rioters protest "austeros," increased its public sector expenditures from 45.2 % of GDP to 50.1% tin he same period. As the Richmond Times-Dispatch noted, in 2011, 23 of the EU's 27 nations jacked up their spending levels. This year 24 will. Apparently, it is not austerity itself that constricts economies. The mere thought of austerity is enough to choke the eurozone to death.

Austerity seems to be working just fine for the masters of the practice, the Germans: We are counting on them to bail out the entire eurozone.

[...]

On June 17, the world will come to an end, as it often does. Ripples from Europe's unraveling will begin traveling to America. Greece will have an election. Greeks will vote to make Germans work until they are 67 so they can retire at 50. They will vote to make someone else pay their bills, fund their holidays and support their benefits.

They will be lectured about this by an American president who asks his own nation to make China pay its bills, fund its holidays and support its benefits. We can only hope he does it from the Hellenic state of California, which has also attempted to outsmart austerity. Remarkably, it hasn't grown jobs, just debt. [...]

Those who complain the most about austerity, are the ones who won't practice it. And they are the ones who are in shit-street financially, wanting someone else to bail them out. The rest of the article explains perfectly why they won't get gain, can't get gain, without some austerity pain first, because they spent (and continue to spend) money they didn't (and still don't) have. Castellanos says that asking whether austerity works is like asking a drinker if sobriety works. Those who are on a binge, (be it spending or drinking) aren't likely to agree.


Austerity alone isn't the answer though, to get things moving again. Jeffery Miron, a senior fellow at the Cato Institute, offers this:

How to get economy growing fast

Cambridge, Massachusetts (CNN) -- In a recent discussion of what his administration might accomplish, Mitt Romney claimed that "by virtue of the policies that we put in place, we'd get the unemployment rate down to 6%, and perhaps a little lower," over a period of four years.

Is this goal attainable?

It is. Indeed, it is not that tough a task. If the United States avoids new growth-retarding policies, such as the tax hikes scheduled for January 1, the economy's natural adjustments will lower unemployment substantially. These include downward adjustments in wages, reallocation of job-seekers from slower to faster growing sectors and regions, reduced in-migration plus increased out-migration, and withdrawals from the labor force.

These adjustments do not always work quickly or for everyone (not every former construction worker can become a computer technician). But history suggests the adjustments do occur, as they have since the recession began. Over the next four years, they will continue to lower the unemployment rate, if not to 6%, at least near that territory.

The more important task for either presidential candidate is restoring the economy to its prerecession growth path. Real GDP has historically grown about 3% per year, and major downturns have been followed by strong recoveries. Within two to three years, therefore, output is typically "back where it would have been."

In this recession, the rapid recovery phase has so far been absent; real GDP is still well below where one would have predicted pre-2008, and with average growth under 3% since the recession ended, the gap grows larger every quarter.

So can Romney, or anyone, get us back to a higher growth rate? Yes. Here is a program that will restore U.S. economic performance: [...]

Miron goes on to list eight reforms that are needed, that make good sense. I suspect some Republicans may have a problem with #4, but the world is changing, including American demographics, and we're going to have to adapt to what IS.