Casino Capitalism: Neoliberalism in Western countries
"When the capital development of a country becomes a by-product of the activities of a casino, the
job is likely to be ill-done"
John Maynard Keynes
Who Rules America >
||Sine ira et studio
Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also
have considered the possibility that, just as Keynes’s ideas were tested to destruction in the
1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s
and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men
… are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.
||Speculation and gambling were always a part of Wall Street but since the 1930’s
they were just a side-show, now they are the show.
comment to Matt Taibbi
Fannie, Freddie, and the New Red and Blue t
The concept of Quite Coup
Stages of transformation
as a result of stagnation of industrial manufacturing
Casino Capitalism and Financial Instability
The Ideology of Casino Capitalism
Early Researchers of Casino Capitalism
Conclusions: From Animal Farm To Animal House
“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”
-- John Kenneth Galbraith, The Great Crash of 1929
The term Casino Capitalism as a specific phase of
neoliberal transformation of capitalism.
Politically it was slow motion corporate coup d'état, which started in 70th and
is now accomplished in the USA and other Western countries which buries social-democratic (New Deal
style) model of capitalism. It hypertrophied police functions of state (in the form of
state) while completely avoiding economic sphere in ways other then enforcement of laws
(with a notable exclusion from this top 1% -- Masters of the Universe). In
this sense it is the opposite of communism (i.e. an entirely state-planned economy) and presupposed
a deregulated economy (in a sense of the "law of jungle" as a business environment) , but with
extremely strong militarized state, suppressing all the attempts to challenge the new "nomenklatura"
(much like was the case in the USSR). It is also called
economic liberalism or
“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political
liberalism has been a strategy to prevent social conflict. It is presented to poor and working
people as progressive compared to conservative or Right wing. Economic liberalism is different.
Conservative politicians who say they hate “liberals” — meaning the political type — have no real
problem with economic liberalism, including neoliberalism.
In other words this is a variant of neoliberal model of corporatism used in wealthy Western countries
during the period of "cheap hydrocarbons". The period that is probably near the end and which
by some estimate can last only another 50 years or so. The major crisis of casino capitalism
in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of
extracting return on capital, typical for casino capitalism), but also with the rise of the
price of oil and decrease of
Energy returned on energy invested (EROEI). In this
sense the current low oil price period that started in late 2014 can be
viewed as the "last hurrah" of the casino
The term itself was coined by Susan
Strange who used it as a title of her book
Casino Capitalism published in 1986. She was one of the first who realized that
- "The roots of the world's economic disorder are monetary and financial";
- "The disorder has not come about by accident, but has in fact been nurtured and
encouraged by a series of government decisions." (p. 60). In other words its was a counter-revolution
of the part of ruling elite which lost its influence in 30th (dismantling New Deal from above
in the USA (Reaganomics) or
Thatcherism in the GB).
According to Susan Strange transformation of industrial capitalism into
neoliberal capitalism ("casino capitalism")
involved five trends. All of them increased the systemic instability of the system and
the level of political corruption:
- Innovations in the way in which financial markets work due to introduction of computers;
- The sheer size of markets;
- Commercial banks turned into investment banks;
- The emergence of Asian nations as large players;
- The shift to self-regulation by banks (pp.9-10).
Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal
"casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter
this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the
same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism
with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor.
The same is true about globalization, especially about
globalization of financial flows, typical for casino capitalism.
this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the
US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism"
which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the
financial capitalism is unstable in the same sense as radioactive elements are unstable. And
this instability tend to increase with time. So there is probably natural half-life period for
neoliberalism as a social system. It might be already reached in 2008. In we assume that
global victory of neoliberalism happened in 1990. It is just 18 years. If we think that it
happened in late 60th, then it is closer to 50 years.
The global crisis
of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free
markets" lead to faster and more uniform economic development of all countries. While the peak of its
"ideological" power might be over (much like the peak of attractiveness of "command socialism" was
over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and
G7. And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain
the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy
rich and resource countries for western multinationals intact using color revolutions and
local wars. But as Napoleon quipped "You can do anything with
bayonets, you just can't sit on them".
Conversion to neoliberal capitalism was a reaction on stagnation of industrial production
and as such it was nurtured and encouraged by a series of government decisions for the last 50 years.
Stagnation of industrial production made expansion of financial sector of paramount importance for the
ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity
Futures Modernization Act of 2000 is pretty telling in this respect.
There were also at least two important parallel developments.
"Appetite comes with eating" and banks which initially rise as an alternative to usury
gradually became indistinguishable from them, the new usury (vampire squid as Matt
Taibbi called GS).
Financial institutions brass became dominant political force partially displacing (or more
correctly complementing) media-military-industrial
complex and oil-energy complex... Sen. Dick Durbin, on a local Chicago radio station
blurted out an obvious truth about Congress which, despite being quite obvious, is rarely
spoken "press scorps" :
“And the banks — hard to believe in a time when we’re facing a banking crisis that many
of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly
own the place.”
In other words the US political system is a brand of corporatism with financial capital
standing on the top stop on interval to Washington, DC corporate hierarchy and holding the most
of political power.
Most respectable authors like Henry Giroux in his article in Counterpunch generally consider the term "casino capitalism"
to be an equivalent to the term Neoliberalism. Here is a relevant quote from Henry Giroux's
Politics in the Age of Casino Capitalism :
There is more at work here than simply a ramped up version of social Darwinism with its savagely
cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii]
there is also a full scale attack on the social contract, the welfare state, economic equality, and
any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s
ode to selfishness and self-interest is of particular importance because it offers a glimpse of a
ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt,
and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It
destroys any viable notion of the and civic virtue in which the social contract and common good provide
the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic
responsibility. The idea of public service is viewed with disdain just as the work of individuals,
social groups, and institutions that benefit the citizenry at large are held in contempt.
As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific
effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive
lives, and money.”[iii]
But it does more by crushing any viable notion of the common good and public
life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions,
and values that constitute the public are now surrendered to powerful financial forces and viewed
simply as another market to be commodified, privatized and surrendered to the demands of capital.
With religious and market-driven zealots in charge, politics becomes an extension of war; greed and
self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted
in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the
work of Satan.
If the Republican candidacy race of 2012 is any indication, then political discourse in the United
States has not only moved to the right—it has been introducing totalitarian values and ideals into
the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work
in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing
income and wealth inequality, and the further merging of the financial and military spheres in ways
that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing
markets from social constraints, fueling competitiveness, destroying education systems, producing
atomized subjects, and loosening individuals from any sense of social responsibility prepare the
populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least
of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the
communities they inhabit.
Totalitarian temptations now saturate the media and larger culture in the language of austerity
as political and economic orthodoxy. What we are witnessing in the United States is the normalization
of a politics that exterminates not only the welfare state, and the truth, but all those others who
bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom
have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian
tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people
of color, and youth.
What too often goes unsaid, particularly with the media’s focus on inflammatory
rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans,
do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly,
it appears these political elite choose to act in ways that sustain their dominance through the systemic
reproduction of an iniquitous social order. In other words, big money and corporate power rule while
electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of
democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form
of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional
nature of our social order, while reinforcing a profound failure of political imagination. The issue
should no longer be how to work within the current electoral system, but how to dismantle it and
construct a new political landscape that is capable of making a claim on equity, justice, and democracy
for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from
The Obama administration has worked to extend the policies of the George W. Bush
administration by legitimating a range of foreign and domestic policies that have shredded civil
liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive
surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists
faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic
tendencies at work in the United States will be dangerously intensified.
Casino capitalism can probably be more properly called financial corporatism. While
the key idea of corporatism: that political actors are not individual people, but some associations
and first of all corporations (which are officially considered to be "persons" and have rights) and
trade unions, remains intact, financial corporatism is different from classic corporatism in several
- Financial corporatism puts financial oligarchy at the top of pecking order. It is, like the USSR
Politburo, is allowed to operate essentially outside the law.
- Instead of the charismatic leader, "free markets" are deified. People mobilization typical for
corporatism is no longer needed and passivity of individual (or, more correctly, limiting his
activities to consumption) is preferred (Inverted
- Labor unions are considered undesirable political actors and organized labor is
blackmailed and prosecuted. While classic corporatism suppressed labor protests by forcing labor unions to asset brokered
by government settlements with capital owners, under casino capitalism labor unions are
considered undesirable political actors and organized labor is blackmailed and prosecuted. Only private corporations
are first class citizens. Atomization of employees by brainwashing people to view
themselves as individual sellers of their labor on job market (rigged by corporations) also make social protest more difficult and
allow capital to dictate condition of employment including shrinking of permanent employment
workforce in favor of contractors and part-timers that we observe in the USA.
- The idea of social justice (which in classic corporatism was limited to the middle class of a
particular nation, anyway), was replaced (or more precisely, limited) it to the well-being of transnational,
mainly financial, elite (aka top 1%). Financial corporatism is not only hostile to labor unions,
it's hostile to the large part of the middle class as well.
- Casino capitalism is international in nature
and ideologically close to Trotskyism (Trotskyism
for rich). While classic corporatism is national, financial corporatism is international by its nature
making it closer to Trotskyism (with the replacement of Communist Party as the vanguard on
world proletariat with financial oligarchy as a vanguard of transnational elite).
Like Trotskyism it is aggressive and use military force for propagating to any country which resist
it (similar to Trotskyism idea of Permanent revolution is implemented via
color revolutions which
serve for establishing in the country a neoliberal social order).
- Promise of well-being is fake. Most of neoliberal ideology is based on lies and
distortions. So powerful propaganda
machine is required for constant brainwashing of population, promising them increase of
individual standards of living to the level that exists in the USA and G7. Which for most
countries can't be achieved.
Historically corporatism in various modifications
became dominant social system after WWII and defeated "command socialism" as was implemented in the
USSR. Here is an instructive review of corporatism history (The
Economic System of Corporatism):
In the last half of the 19th century people of the working class in Europe were beginning to show
interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly
the Catholic intelligentsia, decided to formulate an alternative to socialism which would
emphasize social justice without the radical solution of the abolition of private property.
The result was called Corporatism. The name had nothing to do with the notion of a business corporation
except that both words are derived from the Latin word for body, corpus.
The basic idea of corporatism is that the society and economy of a country should be organized
into major interest groups (sometimes called corporations) and representatives of those interest
groups settle any problems through negotiation and joint agreement. In contrast to a market
economy which operates through competition a corporate economic works through collective bargaining.
The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism.
He would gather the parties to some dispute and say, "Let us reason together."
Under corporatism the labor force and management in an industry belong to an industrial organization.
The representatives of labor and management settle wage issues through collective negotiation. While
this was the theory in practice the corporatist states were largely ruled according to the dictates
of the supreme leader.
One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich
in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin
dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith.
In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function
without direction or control by the state. The general culture heritage of Europe from the medieval
era was opposed to individual self-interest and the free operation of markets. Markets and private
property were acceptable only as long as social regulation took precedence over such sinful motivations
Coupled with the anti-market sentiments of the medieval culture there was the notion that
the rulers of the state had a vital role in promoting social justice. Thus corporatism was
formulated as a system that emphasized the positive role of the state in guaranteeing social justice
and suppressing the moral and social chaos of the population pursuing their own individual self-interests.
And above all else, as a political economic philosophy corporatism was flexible. It could
tolerate private enterprise within limits and justify major projects of the state. Corporatism
has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism,
but it is in fact a separate, distinctive political economic system.
Although rulers have probably operated according to the principles of corporatism from time immemorial
it was only in the early twentieth century that regimes began to identify themselves as corporatist.
The table below gives some of those explicitly corporatist regimes.
|Corporatist Regimes of the Early Twentieth Century
|Country, Religion, Monarchy
||Miguel Primo de Rivera
|Third Hellenic Civilization
In the above table several of the regimes were brutal, totalitarian dictatorships,
usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist.
In particular, the Roosevelt New Deal despite its many faults could not be described as fascist.
But definitely the New Deal was corporatist. The architect for the initial New Deal
program was General Hugh Johnson. Johnson had been the administrator of the military mobilization
program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good
job of managing the economy during that period and that is why he was given major responsibility
for formulating an economic program to deal with the severe problems of the Depression. But
between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National
Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.
It should be noted that many elements of the early New Deal were later declared unconstitutional
and abandoned, but some elements such as the National Labor Relations Act which promoted unionization
of the American labor force are still in effect. One part of the New Deal was the development
of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority
(TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make
TVA a model for the creation of regional political units which would replace state governments. Their
goal was not realized. The model for TVA was the river development schemes carried out in Spain in
the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son
of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.
Corporatist regime typically promote large governmental projects such as TVA on the basis
that they are too large to be funded by private enterprise. In Brazil the Vargas regime created
many public enterprises such as in iron and steel production which it felt were needed but private
enterprise declined to create. It also created an organized labor movement that came to control those
public enterprises and turned them into overstaffed, inefficient drains on the public budget.
Although the above locates the origin of corporatism in 19th century France it roots can be traced
much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development:
Twentieth Century Brazil, says,
Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval
social and legal structures, and into contemporary Catholic social philosophy. These
ideas are based on the premise that man's nature can only be fulfilled within a political
The central core of the corporatist vision is thus not the individual but the political
community whose perfection allows the individual members to fulfill themselves and find happiness.
The state in the corporatist tradition is thus clearly interventionist and powerful.
Corporatism is collectivist; it is a different version of collectivism than socialism but it is
definitely collectivist. It places some importance on the fact that private property is not
nationalized, but the control through regulation is just as real. It is de facto nationalization
without being de jure nationalization.
Although Corporatism is not a familiar concept to the general public, most of the
economies of the world are corporatist in nature. The categories of socialist and pure market
economy are virtually empty. There are only corporatist economies of various flavors.
These flavors of corporatism include the social democratic regimes of Europe and the Americas,
but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The
Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as
was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are
now clearly corporatist in economic philosophy although not in name.
The term "Quiet
coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced
by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of
Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute
for International Economics. From March 2007 through the end of August 2008, he was Chief Economist
of the International Monetary Fund. The term was introduced in his article in Atlantic magazine,
published in May 2009(The
Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming,
says a former chief economist of the International Monetary Fund, is that the finance industry
has effectively captured our government
The wealth of financial sector gave it unprecedented opportunities of simply buying the political
power iether directly or indirectly (via revolving door mechanism):
Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent
of moments we have recently seen in emerging markets (and only in emerging markets): South Korea
(1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors,
afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly
stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll
over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers
into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry
up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled
out into the rest of the economy, causing a severe economic contraction and hardship for millions
But there’s a deeper and more disturbing similarity: elite business interests—financiers,
in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles,
with the implicit backing of the government, until the inevitable collapse. More alarming, they
are now using their influence to prevent precisely the sorts of reforms that are needed, and fast,
to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act
Top investment bankers and government officials like to lay the blame for the current crisis on
the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere
else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie
Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And,
of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness”
were fast asleep at the wheel.
But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American
economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally
associated with Democrats and some with Republicans, they all benefited the financial sector.
Policy changes that might have forestalled the crisis but would have limited the financial sector’s
profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity
Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years
or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and
it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.
Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy
in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading
much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps
greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly
wealthy population invested more and more money in securities, helped by the invention of the IRA
and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector
never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19
percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been
in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948
to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of
the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent
The great wealth that the financial sector created and concentrated gave bankers enormous
political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In
that period, the banking panic of 1907 could be stopped only by coordination among private-sector
bankers: no government entity was able to offer an effective response. But that first age of banking
oligarchs came to an end with the passage of significant banking regulation in response to the Great
Depression; the reemergence of an American financial oligarchy is quite recent.
He further researched this theme in his book 2010 book
13 Bankers The Wall Street Takeover and the Next Financial Meltdown (ISBN 978-0307379054), coauthored with James Kwak. They also founded and regularly
contributes to the economics blog The Baseline Scenario. See also
of Casino Capitalism
The net effect of the ideological counter-revolution based on market fundamentalism ideology was
that it restored the power of financial oligarchy typical for Gilded Age. As Simon Johnson argues
that was partially done by subverting regulators and that
institutions always disproportionately influence public policy:
The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate
crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have
today draw much of their power from being too big to fail. Nationalization and re-privatization
would not change that; while the replacement of the bank executives who got us into this crisis would
be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would
change only the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business.
Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole,
but with the requirement of being broken up within a short time. Banks that remain in private hands
should also be subject to size limitations.
This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual
institutions in a sector that is essential to the economy as a whole. Of course, some people
will complain about the "efficiency costs" of a more fragmented banking system, and these costs are
real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes.
Anything that is too big to fail is too big to exist.
To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths,
we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat
industrial monopolies were not designed to address the problem we now face. The problem in the financial
sector today is not that a given firm might have enough market share to influence prices; it is that
one firm or a small set of interconnected firms, by failing, can bring down the economy. The
Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s
Caps on executive compensation, while redolent of populism, might help restore the political
balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to
the people who work there and to the government officials who were only too happy to bask in its
reflected glory—has been the astounding amount of money that could be made. Limiting that money would
reduce the allure of the financial sector and make it more like any other industry.
Still, outright pay caps are clumsy, especially in the long run. And most money is now made in
largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated.
Regulation and taxation should be part of the solution. Over time, though, the largest part
may involve more transparency and competition, which would bring financial-industry fees down. To
those who say this would drive financial activities to other countries, we can now safely say: fine.
To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important
thing is to change them from time to time. If the U.S. were just another country, coming to the IMF
with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises
that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong
recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.
Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When
they get into trouble, they quite literally run out of money—or at least out of foreign currency,
without which they cannot survive. They must make difficult decisions; ultimately, aggressive
action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich
beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own
currency, which it can print. As a result, it could very well stumble along for years—as Japan did
during its lost decade—never summoning the courage to do what it needs to do, and never really recovering.
A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a
sure thing right now. Certainly no one at the IMF can force it.
In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank
deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup
and AIG. The administration will try to muddle through, and confusion will reign.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against
oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and
chaos were very much in the interests of the powerful—letting them take things, legally and illegally,
with impunity. When inflation is high, who can say what a piece of property is really worth? When
the credit system is supported by byzantine government arrangements and backroom deals, how do you
know that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and
we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t
seem to get into gear.
The second scenario begins more bleakly, and might end that way too. But it does provide at least
some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues
to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s
banks are mostly owned by western European banks—justifiable fears of government insolvency spread
throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies
that export manufactured goods are devastated, and the commodity producers in Latin America and Africa
are not much better off. A dramatic worsening of the global environment forces the U.S. economy,
already staggering, down onto both knees. The baseline growth rates used in the administration’s
current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S.
Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds
may become more concentrated.
The conventional wisdom among the elite is still that the current slump "cannot be as bad as the
Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because
the world is now so much more interconnected and because the banking sector is now so big. We face
a synchronized downturn in almost all countries, a weakening of confidence among individuals and
firms, and major problems for government finances. If our leadership wakes up to the potential consequences,
we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope
it is not then too late.
It is pretty interesting to see how financial oligarchy filters information provided to the population
to fit their biases. For example, the key facts about repeal of Glass-Steagall law (BTW Joe
Biden voted for it) mostly hidden from the public:
- Glass-Steagall had been weakened under Reagan, under the recommendation of Alan Greenspan who
was essentially a Wall Street mole in Fed (see below the concept introduced by
Willem Buiter of ‘cognitive regulatory
capture’ of the Fed by Wall Street.)
- Clinton administration and Congress supported the repeal but it was Phil Gramm who made it happened.
Not only he was the main cheerleader for the repeal. Gramm essentially wrote the bill. As NYT noted:
The measure, which Mr. Gramm helped write and move through the Senate, also split up oversight
of conglomerates among government agencies. The Securities and Exchange Commission, for example,
would oversee the brokerage arm of a company. Bank regulators would supervise its banking operation.
State insurance commissioners would examine the insurance business. But no single agency would
have authority over the entire company.
"There was no attention given to how these regulators would interact with one another," said
Professor Cox of Duke. "Nobody was looking at the holes of the regulatory structure."
The arrangement was a compromise required to get the law adopted. When the law was signed in
November 1999, he proudly declared it "a deregulatory bill," and added, "We have learned government
is not the answer."
- Support was bipartisan which tells something about Clinton Congress:
- REPUBLICANS FOR (52): Abraham, Allard, Ashcroft, Bennett, Brownback, Bond, Bunning, Burns,
Campbell, Chafee, Cochran, Collins, Coverdell, Craig, Crapo, DeWine, Domenici, Enzi, Frist, Gorton,
Gramm (Tex.), Grams (Minn.), Grassley, Gregg, Hegel, Hatch, Helms, Hutchinson (Ark.), Hutchison
(Tex.), Inhofe, Jeffords, Kyl, Lott, Lugar, Mack, McConnell, Murkowski, Nickles, Roberts, Roth,
Santorum, Sessions, Smith (N.H.), Smith (Ore.), Snowe, Specter, Stevens, Thomas, Thompson, Thurmond,
Voinovich and Warner.
- DEMOCRATS FOR (38): Akaka, Baucus, Bayh, Biden, Bingaman, Breaux, Byrd, Cleland, Conrad, Daschle,
Dodd, Durbin, Edwards, Feinstein, Graham (Fla.), Hollings, Inouye, Johnson, Kennedy, Kerrey (Neb.),
Kerry (Mass.), Kohl, Landrieu, Lautenberg, Leahy, Levin, Lieberman, Lincoln, Moynihan, Murray,
Reed (R.L), Reid (Nev.), Robb, Rockefeller, Sarbanes, Schumer, Torricelli and Wyden.
Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had
approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In
December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous
consent after Senator Gramm dominated the Senate debate...
"He was the architect, advocate and the most knowledgeable person in Congress on these topics,"
Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial
"The virtually unregulated over-the-counter market in credit-default swaps has played a significant
role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.,"
Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.
But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for
a change) initiatives in Heritage Foundation and other right-wing think tanks publications.
So what we are experiencing is a the completion of the transformation of one phase of capitalism
to another. It happened in stages:
Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from
re-built Europe and Asian markets severely stressed the US manufacturing. due to competition
return of capital dropped and in several industries became negative.
Computers brought innovations into financial markets. They make possible real time trading
of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast
trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent
by financial institutions from the society.
Globalization kicked in due to new opportunities offered by high speed global communications
(Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the
financial markets increased to the extent that they started to represent a different, new transnational
phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian
elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth
column) West went to significant length to protect them and their racket (Mikhail
Khodorkovsky - Wikipedia,)
Commercial banks turned into investment banks to exploit this opportunity.
Financial sector completely corrupted academic science converting most economists to pay prostitutes
which serve their interests.
Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once
in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge
industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization
of xUSSR space). Harvard Mafia (with some
support from London) did the bidding of western banks in xUSSR space. As more becomes known about
the laundering of Russian money in Western banks, many in the United States will likely try to hide
behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that
country's sorry conditions--with the Harvard Institute for International Development's Russia project
(HIID) playing a major role (Harvard's
'Best and Brightest' Aided Russia's Economic Ruin ). Professor
Jeffery Sacks provided
a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all
xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality,
prostitution, child poverty, and prominent role of organized crime.
Banks became dominant political force on western societies with no real counterbalance from
other parts of the elite. The first president completely subservient to banking elite was elected
in the USA in 1992. Bill Clinton regime lasted eight years and along with
economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial
regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying
force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they
abolished the US pension system as it impede playing with population money and replaced in with widely
inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities
became just a den of bond traders looking for then next mark which give them the ability to put municipalities
deeper in debt.
Newly acquired political power of financial elite speeded the shift to bank "self-regulation"
created huge shadow banking system which dwarf "official" under the smoke screen of "free-market"
propaganda and PR from a coterie of corrupts academics (Chicago
Scholl, Harvard Mafia, etc) . It engaged
in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large
displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly
acquired power financial elite remove all regulations that hamper their interests.
Glass-Steagall was repealed at the last
days of Clinton presidency, financial derivatives became unregulated.
Deindustrialization kicked in. As financial speculation proved to be much more profitable
to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing
which first was limited to manufacturing jobs now extent its reach on IT and decimate previously
profitable sector and its export potential.
Externalities can no longer be suppressed and economics became unstable. Growth of inequality,
job insecurity, as well as frequency of financial crises were natural consequences of financialization
of the economy. They create huge imbalances, like bubble in residential real estate which was blown
with the help and full support of the USA government as a way to overcome dot-com crisis consequences.
Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis
of enormous proportions. By their reckless policies and greed financial sector caused huge financial
crisis of 2008 and now they are forcing national governments to auction off their cultural heritage
to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest
banks, the most corrupt institutions the world has ever known.
Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption
in western economies came under threat. Debt expansion which led to overconsumption within the western
economies affected (or infected) by financialization. To sustain the current standard of living financial
expansion became the necessity. It took the form of a competition for spheres of influence in the
area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central
banks play critical role in financing wars. After all Banks of England was created with this exact
I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA
economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more
correctly the US brand of corporatism) was by-and-large complete.
In short we are living in a new politico-economic system in which financial capital won victory over
both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling
class and this fact is difficult to dispute. As a result. instead of the robber barons of the early
20th century (some of whom actually created/consolidated new industries), we have the top executives
from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old
They are living off parasitic monopolization of access to any (physical, financial, intellectual,
etc.) kind of property and gaining significant amount of profit without contribution to society (see
Rentier capitalism which
is a very fuzzy term for neoliberal model of capitalism).
Stagnation of industrial manufacturing droved up financial speculation as the method to compensate
for falling rate on return on capital. This stagnation became prominent during Reagan administration
(which started the major shift toward neoliberalism), although signs of it were present from early 60th.
For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing
jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries
(66K people) were working in executive and managerial positions. Another 17% are in marketing, sales
and processional specialty occupations (computer system analysts, PR specialists, writer and editors).
Those changes in the structure of employment had several consequences:
- The stagnation of the underlying economy meant that capitalists were increasingly dependent
on the growth of finance to preserve and enlarge their money capital.
- The financial superstructure of the capitalist economy could not expand independently of its
base -- underlying productive economy — hence the bursting of speculative bubbles became a recurrent
and growing problem.
- Financialization could never overcome stagnation of industrial production. It is just
an opium for rich, not a structural adjustment of the stagnation-prone economy. But like addition
to narcotics does to human body it does tremendous damage to real economy.
- Rapid increase in inequality is necessary to sustain the appetites of the elite in the system
with fixed size of the pie. Politico-economic conditions might became even more unfavorable for
labor. Stagnation of industrial production mean shrinking pie, which necessitates redistribution
of wealth in favor of a new, all-powerful financial Rentier class. This redistribution resulted in
partial wipe-out of large swats of middle class. For the past three decades, America has steadily
converted itself into a nation of haves (as Bush II quipped "This is an impressive crowd -- the haves
and the have mores! Some people call you the elite -- I call you my base". ) and have-nots. The cost
of a college education rises rapidly at a time when wages for skilled labor stagnate, so access to
college became against discriminated in favor of upper class of the society. Repressive apparatus
and ideological brainwashing are too strong to mount effective resistance.
The key to understanding of Casino Capitalism is that it was a series of government decisions (or
rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism
has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the
face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate,
by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency
which it had vis-à-vis its main economic rivals and grab as large part of the world economic
pie as it can. And this power grab was supported first of all by the role of dollar as currency in which
oil is traded.
There might be some geo-strategically motives as well as the US elite in late 80th perceived that
competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse
Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege)
until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse
of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization
of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in
Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions.
The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin"
now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US
government we mean US banks".
According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor
to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to
solicit maximum contributions from employees and families. They might have been brought down to earth
this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan
Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America,
$2.1 million. Some think the long-term effect of such contributions to individual candidates was clear
in the roll-call votes for the bailout.
Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to
CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted
against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill
got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average
of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was
passed four days later, 263 to 171.
According to the article
Fire Sale (The American
Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are
The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic
committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look
at Senator Dodd's top donors for 2007-8 on openSecrets.org
) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep.
Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking
truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed
mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage
At the same time rise of financial capital dramatically increased instability. An oversized financial
sector produces instability due to multiple positive feedback loops. In this sense we can talk about
Financial Sector Induced
Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension
of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural
consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation
of the oversized financial sector negative influence of the economy. And in 2008 it did brought out
economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless
gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression.
Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality,
the financial elite much like Bolsheviks elite, is having its own interests above the interests of the
As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism,
and other inhibitions sometimes dumb down national debate". And the same statement is true for financial
elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society
became one giant Enron as money that are made from value addition in the form of manufacturing fade
in significance to the volume of the money that is made from shuffling money around. In other was the
Wall Street's locked USA in the situation from which there is no easy exit.
Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating
creation of various debt instruments, interest of which at some point overwhelm the system carrying
capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there
is no good collateral against which lending freely was possible, even at high rates. This
means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other
words Ponzi economy of "saving and loans" is replaced with Madoff economy.
Whether you shift the resulting huge private debt to public to increase confidence or not, the net
result is of this development of events is a crisis and a huge debt that society needs to take. Actually
the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns
and Lehman was only a start of consolidation of finances and we need to find something that replace
financial sector dominance in the national economy. It would be nice is some technological breakthrough
happened which would lift the country out of this deep hole.
See Financial Sector
Induced Systemic Instability of Economy for more details.
Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious
doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of
Neoliberalism. The latter as an ideology
and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable
autocratic government which serves as channel of a wealth transfer from the public to a rentier elite.
In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.
Addiction of the societies to disastrous politico-economical doctrines are similar to addictions
to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a
lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this
case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better
off adopting ideology of neoliberal capitalism; so it was revolution from above. this abrupt
switch created chaos in economics (which was applauded by Washington which under Clinton
administration adopted the stance the Carnage needs to be destroyed and
facilitated the process), criminal privatization
of major industries, and pushed into object poverty the 99% of population of those countries. For
some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal
This also means that "society at large" did not had effective brakes to the assent of financial plutocracy
(aka financial oligarchy). I would add to this the computer revolution
and internet that made many financial transaction qualitatively different and often dramatically cheaper
that in previous history. Computers also enabled creation of new financial players like mutual funds
(which created a shadow banking system with their bond funds) , hedge funds,
exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.
From the historical view Reaganomics also can be considered to be the US flavor of
Lysenkoism with economics instead of genetics as a target.
Here is how Reaganomics is defined
Reaganomics (a portmanteau
of "Reagan" and "economics") refers to the
economic policies promoted by
United States President
Ronald Reagan. The four
pillars of Reagan's economic policy were to:
- reduce the growth of government spending,
- reduce marginal tax rates on income from labor and capital,
- reduce government regulation of the economy,
- control the money supply to reduce inflation.
In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure
from his immediate predecessors.
Reagan became president during a period of high
unemployment (commonly referred
to as stagflation), which
had largely abated by the time he left office.
Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke
screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to
one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal
dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded
the role of state and government spending. The number two was applied by-and-large to top 1%. The number
three means deregulation in the interests of financial oligarchy and dismantling all social program
that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam,
in the same sense as number one. As soon as financial institutions get in trouble, money are printed
as if there is no tomorrow.
While the essence of Reagonomics was financial deregulation, the other important element was restoring
the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms.
In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to
reverse the New Deal restrictions on financial sector and restore its dominance in the society.
Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very
small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan
administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority"
as an important part of republican political base, which can be attracted to detrimental to its economic
position policies by the smoke screen of false "moral" promises).
It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished
record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism
opponents were purged and economic departments of the country were captured by principless careerists
ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special
breed of careerists rotated from Republican Party into Fed and other government structures. A classic
example of compulsive careerists that were used by finance sector to promote its interests was Alan
One of the key ideas of Reaganomics was the rejection of the sound approach that there should be
a balance between too much government regulation and too little and that government role is important
for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists
and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare
to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS,
Citi, AIG, are quite natural consequence of Reaganomics.
|Reaganomics was a the US flavor of Lysenkoism with economics
instead of generics as a target... It can and should be called Economic Lysenkoism.
The most interesting part of Reaganomics was that the power of this ideology made it possible to
conditioned "working class" and middle class to act against their own economic interests. It helped
to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed
to achieve with working class of the USSR, but with much more resentment. This makes it in many ways
very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way:
"history repeats, first as a tragedy, then as farce).
Along with the term Reaganimics which implicitly stresses the deregulation, the other close term
"market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview
Market Fundamentalism is the exaggerated faith that when markets are left to operate on their
own, they can solve all economic and social problems. Market Fundamentalism has dominated
public policy debates in the United States since the 1980's, serving to justify huge Federal tax
cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the
government’s civilian programs.
Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any
pseudo-scientific theory with the term Lysenkoism. This holds true for both
Market Fundamentalism (after all
Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and
hired guns from academia just do what powers that be expected) and, especially,
side economic. The political genius of those ideas is evident. Supply-side economics transformed
Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower
deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not
like a free lunch?
In this sense the Republican Party played the role very similar to the Communist Party of the USSR.
For example supply side economics was too bizarre and would never survive without explicit government
support. This notion is supported by many influential observers. For example, in the following
comment for Krugman article (Was
the Great Depression a monetary phenomenon):
Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a
political construct than based on sound economic theory. However, it would take a while before
its toxic legacy is purged from the economics departments. Indeed, in some universities this
might never happen.
Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent
a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case
of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases
the societies were economically and ideologically bankrupt at the end.
Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy
— and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of
the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of
the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR
was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to
critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population
were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants
in industrialized countries. From this point of view this category of "state slaves" is generally more
numerous that gulag inmates. Prison population also can be counted along those lines.
It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its
dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant
privilege" of dollar status as the global fiat currency.
Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance,
and real estate) and diminished role of other and first of all manufacturing industries. It was also
accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph
of the trader in assets over the long-term producer" in
Attempts of theoretical justification of Economic Lysenkoism fall into several major categories:
Those can be called pillars, cornerstones of Economic Lysenkoism. Each of the deserves as separate
article (see links above).
Historically especially important was
Chicago school of market fundamentalism
promoted pseudo-scientific theories of Milton Freedman (Chicago
School) as well as
supply side economics.
The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second
life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it
New Deal regulations were systematically destroyed. Dumped down variants of
like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative"
entrepreneur as a new Übermensch,
which stands above morality.
"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good'
men, Christians, and other nihilists ... When I whispered into the ears of some people that they
were better off looking for a
Cesare Borgia than a
Parsifal, they did not believe
Safranski argues that the combination of ruthless
warrior pride and artistic brilliance
that defined the Italian
Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche
intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of
the modern Western middle class and its pseudo-Christian egalitarian value system.
The instability and volatility of active markets can devalue the economic base of real lives, or
in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting
and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge
manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty
objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse
and relying on the most ignorant part of the population as the political base (pretty much reminiscent
of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks
While transformation to casino capitalism was an objective development, there were specific individuals
who were instrumental in killing New Deal regulations. We would single out the following twelve figures:
- Ronald Reagan
(although first steps toward casino capitalism were made under Carter).
- Milton Friedman
- Alan Greenspan
- Phil Gramm
- Robert Rubin
- Larry Summers
- Bush II
- Bill Clinton
- Sandy Weill
- Jeffrey Sachs
with his "shock therapy" racket
- Martin Feldstein
There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were
rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous
consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be
called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to
prosecute at least some of them.
In Bailout Nation (Chapter 19) Barry
Ritholtz tried to rank major players that led country into the current abyss:
1. Federal Reserve Chairman
2. The Federal Reserve
(in its role of setting monetary policy)
3. Senator Phil
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and
Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley,
and Goldman Sachs) and their CEOs
18. President George
19. President Bill
20. President Ronald
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries
Robert Rubin and
25. FOMC Chief Ben
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation
of debt. He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge
Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism
of increasing fragility:
- Hedge finance: income flows are expected to meet financial obligations in every period.
The "hedge borrower" is one who borrows with the intent of making debt payments from cash flows from
- Speculative finance: the firm must roll over debt because income flows are expected to
only cover interest costs. the "speculative borrower" who borrows based on the belief that the appreciation
of the value of the assets (e.g. real estate) to refinance or pay-off their debt but who does not
have sufficient resources to repay the original loan, otherwise;
A Minsky moment is the point in a
credit cycle or
business cycle when
investors have cash flow problems due to spiraling debt they have incurred in order to finance
speculative investments. At this point, a major selloff begins due to the fact that no
counterparty can be found
to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse
in market clearing
asset prices and a sharp drop in
- Ponzi finance: income flows won’t even cover interest cost, so the firm must borrow more
or sell off assets simply to service its debt. The "Ponzi borrower" (named for
Charles Ponzi, see also
Ponzi scheme) is who relies
on continually rolling over the principal obtained from new participants in the Ponzi scheme to cover
interests. After a certain point, the private sector debt can only be perceived as sustainable as
long as asset prices are perceived to be in continuous growth. Since the rise of asset prices is
fueled by rising indebtness, from a certain point onwards, the process acquires a pure speculative
character. When the rise in asset prices is interrupted, the private sector discovers it is insolvent.
The choice become either a horrible end or an endless horror.
After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper
power (American exceptionalism)
and "end of history" where capitalism was supposed to reign supreme followed. But in 2000 the first
moment to pay the piper arrives. It was postponed by Iraq war and housing bubble but reappeared in much
more menacing form in 2008. It looks like in 2009 the USA arrived to the a classic Minsky moment with
high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which
threaten the very survival of our system and way of life.
The shift from speculative toward Ponzi finance was speed up by increased corruption of major players.
"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained,
it encourages greater speculation and risk taking in borrowing and lending. Financial innovation
makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the
basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods
naturally lead to optimism, to booms, and to increasing fragility.
A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation,
once started, is very difficult to stop. It may not end until balance sheets are largely purged of
bad debts, at great loss in financial wealth to the creditors as well as the economy at large."
For Strange the speed at which computerized financial markets work combined with new much larger
size and their now, near-universal pervasiveness is an important qualitative change. One of the side
effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are
invested daily as foreign transactions. It is estimated that 98 per cent of these transactions are speculative.
In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.
Susan Strange (June 9, 1923 - October 25, 1998) was a
British academic who was
influential in the field of
political economy. Her most important publications include Casino Capitalism, Mad Money,
States and Markets and The retreat of the State: The Diffusion of Power in the World Economy.
For a quarter of a century, Susan Strange was the most influential figure in British international
studies. She held a number of key academic posts in Britain, Italy and Japan. From 1978 to 1988,
Montague Burton Professor of International Relations at the
London School of
Economics and Political Science (LSE), the first woman to hold this chair and a professorial
position in international relations at the LSE. She was a major figure in the professional associations
of both Britain and the US: she was an instrumental founding member and first Treasurer of the
British International Studies Association (BISA)
 and the first female President of the
Studies Association (ISA) in 1995.
It was predominantly as a creative scholar and a forceful personality that she exercised her influence.
She was almost single-handedly responsible for creating ‘international political economy’ and turning
it into one of the two or three central fields within international studies in Britain, and she defended
her creation with such robustness, and made such strong claims on its behalf, that her influence
was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest
and most influential campaigners for the closer integration of the study of international politics
and international economics in the English language scholarship.
In the later period of her career, alongside the financial analyses offered in Casino Capitalism
(the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad
Money, Strange's contributions to the field include her characterisation of the four different
areas (production, security, finance and knowledge) through which power might be exercised in International
Relations. This understanding of what she termed "structural power", formed the basis of her argument
against the theory of
American Hegemonic Decline in the early eighties.
Her analysis particularly in States and Markets focused on what she called the ‘market-authority
nexus’, the see-saw of power between the market and political authority. The overall argument of
her work suggested that the global market had gained significant power relative to states since the
1970s. This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was
emerging between territorially-bound nation states and weak or partial intergovernmental cooperation
in which markets had a free hand which could be constructive or destructive.
Among early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea
that the major economic function of Governments is to strengthen countervailing powers to achieve
some kind of balance between capital and labor. While unions are far from being perfect and
his prediction did not materialize in view of sliding to corporatism it may well be that the renewed
support of unions right efforts to organize could make a big contribution to a revised, post subprime/derivatives/shadow_banking
crisis stage of capitalism.
His critique of Milton Freedman pseudoscience still has its value today.
As Joseph Stiglitz noted (CSMonitor,
Dec 28, 2006):
...In many ways, Galbraith was a more critical observer of economic reality.
Driven to understand market realities
Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely
needed reminder that all is not quite as perfect as the perfect market models – with their perfect
competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's
Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as
it was, with all the problems of unemployment and market power that simplistic models of competitive
markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally
... ... ...
In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929
– including the role of the stock market's speculative greed fed by (what would today be called)
irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused
on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.
What Galbraith understood, and what later researchers (including this author) have proved, is
that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides
capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered
markets often produce too much of some things, such as pollution, and too little of other things,
such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect –
that is, always – markets are inefficient; hence the need for government action.
Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing
powers. He had the misfortune of articulating these ideas before the mathematical models of game
theory were sufficiently developed to give them expression. The good news is that today, more attention
is being devoted to developing models of these bargaining relationships, and to complex, dynamic
models of economic fluctuations in which speculation may play a central role.
While Friedman never really appreciated the limitations of the market, he was a forceful critic
of government. Yet history shows that in every successful country, the government had played an important
role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure.
Galbraith made this case better than most.
Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending
with advertising, political persuasion, and social pressures. It was because of his close touch with
reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson
Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as
it is theorized in simplistic models – has enhanced our understanding of the market economy.
He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual
life: Who will stand up against the economics establishment to articulate an economic vision that
is both in touch with reality and comprehensible to ordinary citizens?
Galbraith was vindicated in his belief that the only economics possible is political economics and
as government is always an agent of dominant class it always mixed with politics. Krugman and Stiglitz
both have eaten humble pie, because according to neoclassical economics the crises should not have happened.
Both should now reread Galbraith's
The Great Crash: 1929 (see also
BTW it is interesting that in 1996 Paul Krugman criticized limitations of Galbright vision in the following
To be both a liberal and a good economist you must have a certain sense of the tragic--that is,
you must understand that not all goals can be attained, that life is a matter of painful tradeoffs.
You must want to help the poor, but understand that welfare can encourage dependency. You must want
to protect those who lose their jobs, but admit that generous unemployment benefits can raise the
long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but
accept that too high a rate of taxation can discourage investment and innovation.
To the free-market conservative, these are all arguments for government to do nothing, to accept
whatever level of poverty and insecurity the market happens to produce. A serious liberal does not
reply to such conservatives by denying that there are any trade-offs at all; he insists, rather,
that some trade-offs are worth making, that helping the poor and protecting the unlucky may have
costs but will ultimately make for a better society.
The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who
is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation
of the complexity of the human condition than a mere technical economist would -- lacks this tragic
sense. Galbraith's vision of the economy is one without shadows, in which what is good for social
justice always turns out to have no unfavorable side effects. If this vision is typical of liberal
intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness
to face up to uncomfortable reality.
Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to
Economist's View blog) :
Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private
opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels
by extravagant private car to picnic by a polluted river.
Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention
to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism:
a reluctance to acknowledge that resources are scarce. In Galbraith’s scheme, said Herbert
Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked
whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but
they were not the right questions.”
This idea of "casino capitalism" as a driver of financial instability was developed further in the
The Crisis of Global Capitalism by George Soros (1998), who highlights the potential for disequilibrium
in the financial system, and the inability of non-market sectors to regulate markets.
Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated
with such candor and accuracy that the book made a significant impact. The following is a sampling of
- Unregulated financial markets are inherently unstable. Soros observes that, contrary to
conventional economic theory, financial markets are not driven toward a relatively stable and rational
price by the objective value assessment of such things as the soundness of a company's management,
products, or record of profitability. Rather they are constantly driven away from equilibrium
by the momentum of self-fulfilling expectations -- a rising stock price
attracts buyers who further raise the price-to the point of collapse. The recent massive inflation
and subsequent collapse in the price of the shares of unprofitable dot-com companies illustrates
Bank lending also contributes to the instability, because the price of real and financial assets
is set in part by their collateral value. The higher their market price rises the larger the loans
banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value
of the assets plummets below the amount of the money borrowed against them. This forces banks
to call their loans and cut back on the lending, which depresses asset prices and dries up the
money supply. The economy then tanks-until credit worthiness is restored and a new boom phase
- Financial markets are amoral by definition. Following Napoleon Bonaparte, Soros stressed
that there is no meaningful place for individual moral behavior in the context of financial markets,
because such behavior has no consequence other than to reduce the financial return to the ethical
When I bought shares in Lockheed and Northrop after the managements were indicted for bribery,
I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England
was on the other side of my transactions, and I was in effect taking money out of the pockets
of British taxpayers. But if I had tried to take social consequences into account, it would have
thrown off my risk-reward calculation, and my profits would have been reduced.
Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and
Britain would have devalued sterling no matter what he did. "Bringing my social conscience into
the decision-making process would make no difference in the real world; but it may adversely affect
my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral,
but his basic argument is accurate. His understanding that it is futile to look to individual morality
as the solution to the excesses of financial markets is all too accurate.
- Corporate employees are duty-bound to serve only corporate financial interests. Soros
Publicly owned companies are single-purpose organizations-their purpose is to make money. The
tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned
and upright citizens, but their room for maneuver is strictly circumscribed by the position they
occupy. They are duty-bound to uphold the interests of the company. If they think that cigarettes
are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they
ought to quit their jobs. Their place will be taken by people who are willing to carry on.
Though not specifically mentioned by Soros, this is why corporations were in the past (at least
partially) excluded from the political processes (although it was never complete and it is well known
fact that Crusades and
Siege of Constantinople
(1204) were financed by Genoese
bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the
society can define their goals and the rules of the marketplace. They are incapable of distinguishing
between private corporate interests and broader public interests. But that changed with the global
dominance of corporatism.
- Financial markets are oblivious to externalities and are infected by "short-termism". Specifically
the fact that a strategy or policy produces economic returns in the short-term does not mean the
long-term results will be beneficial. The focus of financial markets is on short-term individual
gain to the exclusion of both social and longer-term consequences. The fact that particular policies
and strategies are effective in producing short-term financial returns does not mean they are more
generally beneficial or desirable. Soros offers the example that running up a budget or trade deficit
"feels good while it lasts, but there can be hell to pay later."
- The relationship between the center and the periphery of the capitalist system is profoundly
unequal. The powerful countries at the center of the capitalist system are both wealthier and
more stable than countries at the periphery because control of the financial system and ownership
of productive assets allows them to shape economic and political affairs to their benefit.
"Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the
development of democratic institutions. The international flow of capital is subject to catastrophic
In times of uncertainty financial capital tends to return to its country of origin, thus depriving
countries at the periphery of the financial liquidity necessary to the function of monetized economies.
"The center's most important feature is that it controls its own economic policies and holds in its
hands the economic destinies of periphery countries."
- In the capitalist system greed (aka "monetary values") tend to displace social values in sectors
where this is destructive of important public interests. Soros writes:
Monetary values have usurped the role of intrinsic values, and markets have come to dominate
spheres of existence where they do not properly belong. Law and medicine, politics, education,
science, the arts, even personal relations-achievements or qualities that ought to be valued for
their own sake are converted into monetary terms; they are judged by the money they fetch rather
than their intrinsic value."
Because financial "capital is free to go where most rewarded, countries vie to attract and retain
capital, and if they are to succeed they must give precedence to the requirements of international
capital over other social objectives.
One notable later researcher of casino capitalism, especially "free market" fundamentalism propaganda
Cambridge University researcher Ha-Joon Chang. In 2011 he published a fascinating book
23 Things They Don't Tell You About Capitalism. Here are two Amazon reviews that shed some light
at the key ideas of the book:
Loyd E. Eskildson
Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has
written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans.
Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.
Chang takes on the free-marketers' dogmas and proposes ideas like
- there is no such thing as a free market;
- the washing machine has changed the world more than the internet has --[ I respectfully
- we do not live in a post-industrial age;
- globalization isn't making the world richer;
- governments can pick winners;
- some rules are good for business;
- US (and British) CEOs are overpaid;
- more education does not make a country richer;
- and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg,
Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes
per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland,
Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the
highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and
pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more
frequent crises. Britain's growth rate in income per person per year was 2.4 per cent
in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s
and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per
cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009,
and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world
economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'.
Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment
as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the
world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s,
and that Britain was one of world's the most protectionist countries during its rise, from the
1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than
any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead,
we need controls capital, on mergers and acquisitions, and on financial products. We need
the welfare state, industrial policy, and huge investment in industry, infrastructure, worker
training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such
growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term
investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge
all our friends and colleagues to read.
The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant
paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis,
but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.'
Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism."
Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics
professor at the University of Cambridge, is no enemy of capitalism, though he contends its current
conservative version should be made better. Conventional wisdom tells us that left alone, markets
produce the most efficient and just outcomes - 'efficient' because businesses and individuals
know best how to utilize their resources, and 'just' because they are rewarded according to their
productivity. Following this advice, countries have deregulated businesses, reduced taxes and
welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised
- slower growth and rising inequality, often masked by rising credit expansion and increased working
hours. Alternatively, developing Asian countries that grew fast did so following a different version
of capitalism, though to be fair China's version to-date has also produced much greater inequality.
The following summarizes some of Chang's points:
- "There is no such thing as a free market" - we already have hygiene standards in
restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require
licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008,
the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by
President Bush on the grounds that it was a necessary state intervention consistent with free-market
capitalism. Chang's conclusion - free-marketers contending that a certain regulation should
not be introduced because it would restrict market freedom are simply expressing political
opinions, not economic facts or laws.
- "Companies should not be run in the interest of their owners." Shareholders are
the most mobile of corporate stakeholders, often holding ownership for but a fraction of a
second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate
strategies that maximize short-term profits and dividends, usually at the cost of long-term
investments. (This often also includes added leverage and risk, and reliance on socializing
risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate
limited liability, while a boon to capital accumulation and technological progress, when combined
with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison,
Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional
managers to maximize their own prestige via sales growth and prestige projects instead of maximizing
profits. Another negative long-term outcome driven by shareholders is increased share buybacks
(less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist
estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have
prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale
layoffs from off-shoring. Governments of other countries encourage longer-term thinking by
holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater
worker representation (Germany's supervisory boards), and cross-shareholding among friendly
companies (Japan's Toyota and its suppliers).
- "Free-market policies rarely make poor countries rich." With a few exceptions, all
of today's rich countries, including Britain and the U.S., reached that status through protectionism,
subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing
nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite,
not because of, protectionism. The problem with that explanation is the number of other nations
paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany,
Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong,
Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang
believes the 'official historians' of capitalism have been very successful re-writing its history,
akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He
also points out that developing nations that stick to their Ricardian 'comparative advantage,'
per the conservatives prescription, condemn themselves to their economic status quo.
- "We do not live in a post-industrial age." Most of the fall in manufacturing's share
of total output is not due to a fall in the quantity of manufactured goods, but due to the
fall in their prices relative to those for services, caused by their faster productivity growth.
A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities
that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing
nations to skip manufacturing and go directly to providing services forget that many services
mainly serve manufacturing firms (finance, R&D, design), and that since services are harder
to export, such an approach will create balance-of-payment problems. (Chang's preceding points
directly contradict David Ricardo's law of comparative advantage - a fundamental free market
precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite
lacking experienced managers and natural resources, is another.)
- "The U.S. does not have the highest living standard in the world." True, the average
U.S. citizen has greater command over goods and services than his counterpart in almost any
other country, but this is due to higher immigration, poorer employment conditions, and working
longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators
and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's
higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The
U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S.
in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides
the best economic model. (This is already occurring - the World Bank's chief economist, Justin
Lin, comes from China.)
- "Governments can pick winners." Chang cites examples of how the Korean government
built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG),
despite lacking raw materials or experience for those sectors. True, major government failures
have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum
smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed
- e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland,
France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite
well with government-picked winners. Another problem is that business and national interests
sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest
of maintaining full employment. (However, greater unbiased U.S. government involvement would
be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations
- $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative
free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve
at the beginning of the Great Recession. Government planning allows minimizing excess capacity,
maximizing learning-curve economies and economies of scale and scope; operational performance
is enhanced by also forcing government-owned or supported firms into international competition.
Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials,
building infrastructure) are necessary for emerging economies to move into more sophisticated
- "Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics
is based on the belief that the poor maximize current consumption, while the rich, left to
themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in
the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before
the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3%
in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater
paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased
their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national
output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
- "U.S. managers are over-priced." First, relative to their predecessors (about 10X
those in the 1960s; now 300-400X the average worker), despite the latter having run companies
more successfully, in relative terms. Second, compared to counterparts in other rich countries
- up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase,
world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial
and Commercial Bank of China, the world's largest, being paid $234,700.
Read more ›
Willem Buiter in his FT article
After the Crisis Macro Imbalance, Credibility and Reserve-Currency suggested that after financial
crisis of 2008 there might be very long a painful deleveraging period aka
secular stagnation. In short each financial
crisis make recovery longer and longer. That's why the US will most likely face a long period
of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:
Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer
the required period of digestion. This explains for the paradox of trying to stimulate consumption
when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption.
A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately
searches a new bubble to invest in. "
... ... ...
The roots of the crisis are major international macroeconomic imbalances. Despite the fact that
the excesses of the financial system were instrumental to lead these imbalances further than otherwise
possible, insufficient regulation should not be viewed as the main factor behind the crisis. The
expenditure of central countries, spinned by all sort of financial innovations created by a globalized
financial system, was the engine of world growth. When debt became clearly excessive in central countries
and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy.
With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist.
The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even
if successful, the economies of the US and the other central countries, given the burden of excessive
debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption
of troubled assets by the public sector, in order to avoid the collapse of the financial system,
might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient
to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated
effort to increase public expenditure is successful, the central economies will remain stagnant for
as long as the excessive indebtedness of the private sector persists. The period of digestion of
excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the
effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute
to the recovery of internal demand, the temptation to central economies to also adopt a protectionist
stance will be strong.
Willem Buiter also defined ‘cognitive
regulatory capture’ which existed during the Greenspan years and when the Fed were just an arm of Wall
In his 2008 Vanity Fair article
Stiglitz identifies five key steps in transformation of American capitalism to Casino Capitalism
(moments of failure as he called them):
This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and
financial sector concerns and fears and in an overestimation of the strength of the link between
financial market turmoil and financial sector deleveraging and capital losses on the one hand, and
the stability and prosperity of the wider economy on the other hand. The paper gives five examples
of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory
capture. The abstract of the paper follows next. The latest version of the entire enchilada can be
found here. Future revisions
will also be found there.
No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:
Volcker also understood that financial markets need to be regulated. Reagan wanted someone who
did not believe any such thing, and he found him in a devotee of the objectivist philosopher and
free-market zealot Ayn Rand.
If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll
get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles.
- Congress repealed the Glass-Steagall Act in 1999 under Bill Clinton (Glass-Steagall
was a depression-era reform that separated commercial and investment banks)
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will
create Chinese walls to make sure that the problems of the past do not recur. As an economist,
I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend
human behavior toward self-interest—toward short-term self-interest, at any rate, rather than
Tocqueville’s "self interest rightly understood."
Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase
their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed
securities, inflating the housing bubble in the process."
Once more, it was deregulation run amuck, and few even noticed.
- The Bush tax cuts, both on income and capital gains
The Bush administration was providing an open invitation to excessive borrowing and lending—not
that American consumers needed any more encouragement.
- Faking the Numbers
Here he refers to bad accounting, the failure to address problems with stock options, and the
incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic
- Paulson and the Flawed Bailout
Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets
and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with
money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure
that the banks would use the money to re-start lending. He even allowed the banks to pour out money
to their shareholders as taxpayers were pouring money into the banks.
The truth is most of the individual mistakes boil down to just one: a belief that markets are
self-adjusting and that the role of government should be minimal. Looking back at that belief during
hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman
Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your
ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace
by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable
that we would eventually arrive at the place we are today.
The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day.
Ideas have consequences, especially when we stop empirically testing them. Republican economics have
created great pain to America and harmed our national interest.
The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:
As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic
incentives to bend human behavior toward self-interest — toward short-term self-interest
Yes, for all their claims to science, the premise conflicts with tendencies of people.
This is the real legacy of Ronald Reagan and Alan Greenspan:
Instead of conclusion I will reproduce the post from Sudden Debt (March
The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich
and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in
a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class
households to for-profit corporations and the richest 1% of the population. It created an unprecedented
wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class
without which democracy can’t survive.
Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in
his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations
and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."
Animal Farm all animals are equal - except that some are more equal than others. All in the spirit
of law, order and the proper functioning of society, of course. Fittingly, the animals that have
chosen this role by themselves and for themselves, are the pigs.
Cut to US financial
markets today. After years of swinish behavior more reminiscent of
Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it
wasn't enough that they devoured all the "free market" food available and inundated the world with
their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they
are more equal than others.
But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely
with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly
knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all
that farms function best when animals are free to do as they please, guided solely by invisible hooves.
No regulation, no oversight, no common sense. Oh yes, and pigs fly..
So what is to be done now? Two things:
- (a) Let financial markets sort themselves out, but with rock solid backing for bank depositors,
pension funds and public institutions. The public purse should not be used to bail out - directly
or indirectly - speculators in hedge funds, private equity funds and the like. Those that live
by the leverage sword can defend themselves or perish by credit destruction.
- (b) Revamp public policy towards increasing earned income for working people.
In other words, the focus from now on should be on adding value by means of work and savings (capital
formation), instead of inflating assets and borrowing.
Furthermore, we should realize that in a world already inhabited by close to 7 billion people
and beset by resource depletion and environmental degradation, defending growth for growth's sake
is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder
on the accelerator is not going to make it go any faster and will likely result in a fatal crash.
Debt, and finance in general, should be left to re-size downwards to a level that better reflects
the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative"
in the worst interpretation of the words: they are designed to artificially maintain debt at levels
that myopically projects growth as far as the eye can see.
What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself
bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value.
What scares me, though, is the
statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though
he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility
and margin of error that's appropriate given the speed at which the transaction came together", he
If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets
to buy one of the largest investment banks in the world, where should all other financial firms be
trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding
into a vacuum?
- [Jul 24, 2016] The Immorality and Brutal Violence of Extreme Greed-- ( July 22, 2016 | Naked Capitalism )
- [Jul 20, 2016] Bill Black: Mankiws Mythical Ten Commandments of Theoclassical Economics ( May 17, 2016 | nakedcapitalism.com )
- [Jul 20, 2016] Global elites must heed the warning of populist rage ( July 19, 2016 | ft.com )
- [Jul 19, 2016] The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable. ( peakoilbarrel.com )
- [Jul 19, 2016] In the world of 50 dollar per barrel oil neither offshore nor shale are profitable ( peakoilbarrel.com )
- [Jul 19, 2016] Bakken is trending towards the less spectacular wells with a lots of sub 1K, and more than a few sub 500 BO IP ( peakoilbarrel.com )
- [Jul 19, 2016] Russia is seriously hurting because of the low price of oil and Venezuela is dying because of the low price of oil. How can anyone on earth possibly believe that price does not matter? ( peakoilbarrel.com )
- [Jul 19, 2016] Conventional producers no longer can significantly ramp up production when they like ( peakoilbarrel.com )
- [Jul 19, 2016] E P spending is much lower this year than was expected even after the big cuts initially announced. US independents and Canada in particular are hurting ( peakoilbarrel.com )
- [Jul 19, 2016] Prices of contractors are low as long as nobody drills ( peakoilbarrel.com )
- [Jul 19, 2016] Therefore overall the undiscovered resources might now be zero for maximum, median and minimum cases, which would be quite a bit different from USGS numbers of 4, 7 and 11 Gb ( peakoilbarrel.com )
- [Jul 19, 2016] US oil rigs up 6, gas rigs up 1. Permian up 2, Williston down 1, Eagle Ford unchanged. ( peakoilbarrel.com )
- [Jul 19, 2016] Oil is becoming much harder to find ( peakoilbarrel.com )
- [Jul 19, 2016] Has depletion finally gained the upper hand? ( peakoilbarrel.com )
- [Jul 19, 2016] Oil Prices Lower Forever Hard Times In A Failing Global Economy ( www.forbes.com )
- [Jul 19, 2016] Republican Platform Unexpectedly Calls For A Return To Glass-Steagall ( Zero Hedge )
- [Jul 18, 2016] Automatic Braking Systems To Become Standard On Most U.S. Vehicles The Two-Way ( NPR )
- [Jul 17, 2016] 07/16/2016 at 8:52 am ( peakoilbarrel.com )
- [Jul 17, 2016] Ron Patterson ( peakoilbarrel.com )
- [Jul 17, 2016] The Stagnation Capitulation and The Taper Tantrum ( July 12, 2016 | Angry Bear )
- [Jul 17, 2016] Cassandra's Legacy Some reflections on the Twilight of the Oil Age - part I ( cassandralegacy.blogspot.in )
- [Jul 16, 2016] China's Oil Output Tanks , Hits 4 Year Low ( Jul 15, 2016 | OilPrice.com )
- [Jul 16, 2016] Paul Krugman Bull Market Blues ( Economist's View )
- [Jul 16, 2016] Stats Watch ( www.nakedcapitalism.com )
- [Jul 16, 2016] A Plea for Some Sympathy for Repentant Left Neoliberals... ( www.bradford-delong.com )
- [Jul 12, 2016] The President of Belgian Magistrates Neoliberalism is a form of Fascism - Defend Democracy Press ( Defend Democracy )
- [Jul 12, 2016] The Fiscal Times ( www.thefiscaltimes.com )
- [Jul 12, 2016] The Abdication of the Left by Dani Rodrik - Project Syndicate ( www.project-syndicate.org )
- [Jul 06, 2016] We Don't Need Trump or Brexit to Reject the Credo of Neoliberal Market Inevitability ( www.truth-out.org )
- [Jul 05, 2016] A few good recent links ( peakoilbarrel.com )
- [Jul 05, 2016] New estimate for reserves and resources from Rystad ( peakoilbarrel.com )
- [Jul 05, 2016] Arthur Berman Why The Price Of Oil Must Rise Peak Prosperity ( www.peakprosperity.com )
- [Jul 05, 2016] Globalization and Neoliberalism ( people.umass.edu )
- [Jul 04, 2016] LTO is not a plague. The plague is development of same out of primarily debt, as opposed to primarily out of cash flow. ( peakoilbarrel.com )
- [Jul 04, 2016] Nationalism Isnt Replacing Globalism ( June 30, 2016 | The National Interest Blog )
- [Jul 04, 2016] Brexit - the end of globalization ( DW.COM 30.06.2016 )
- [Jul 03, 2016] Men Exiting Workforce as Low-Wage Jobs Vanish ( June 21, 2016 | nakedcapitalism.com )
- [Jul 03, 2016] Whom do we blame for our troubles ( July 2, 2016 | Dissident Voice )
- [Jul 02, 2016] Peak Oil in Asia and oil import trends (part 2) ( crudeoilpeak.info )
- [Jul 01, 2016] The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in fact they are declining at about 12 persen year over year ( peakoilbarrel.com )
- [Jul 01, 2016] The Monthly Energy Review has US production dropping 212,000 bpd in April and 148,000 bpd in May. ( peakoilbarrel.com )
- [Jul 01, 2016] Ron Patterson ( peakoilbarrel.com )
- [Jul 01, 2016] For 2016, the decline is expected to continue increasing with a 700 kbbl/d increase in the yearly decline from the mature oil fields. ( peakoilbarrel.com )
- [Jun 29, 2016] The fact that imports are rising even faster than production is declining is a sure sign that production is actually falling ( peakoilbarrel.com )
- [Jun 29, 2016] the high reported IP's were used to wow investors and possible goose the EURs ( e%20high%20reported%20IP's%20were%20used%20to%20wow%20investors%20and%20possible%20goose%20the%20EUR )
- [Jun 29, 2016] Faulkner, Breitlings founder and chief executive officer, and other executives told investors their money would be used to drill oil wells, but instead spent it on cars, jewelry and gentlemans clubs ( peakoilbarrel.com )
- [Jun 29, 2016] A decline of 406,000 barrels per day of total liquids in one month is not a decline but a collapse. ( peakoilbarrel.com )
- [Jun 28, 2016] Neoliberal elites in the EU lost any touch with common people ( www.nakedcapitalism.com )
- [Jun 28, 2016] Why the financial community is having such a difficult time figuring out shale economics given access to production data, as well as detailed information in company 10K and 10Q ? ( peakoilbarrel.com )
- [Jun 28, 2016] The EIA doesnt know what its talking about when they are giving their shale reserves estimates ( peakoilbarrel.com )
- [Jun 28, 2016] This new drop in oil price has to do with extreme financial instability and not with supply and demand ( peakoilbarrel.com )
- [Jun 28, 2016] Brexit as Working Class Rebellion against Neoliberalism and "Free Trade" ( jackrasmus.com )
- [Jun 28, 2016] Jesse's Café Américain Mark Blyth On Neoliberalism, Brexit, and the Global Revolt Against the One Percent and their Unelected ( jessescrossroadscafe.blogspot.com )
- [Jun 28, 2016] https://storify.com/cshirky/republican-and-democratic-parties-are-now-host-bod ( storify.com )
- [Jun 28, 2016] The epitome of neoliberalism, in my view, goes under the euphemism of "labour market flexibility." ( crookedtimber.org )
- [Jun 28, 2016] Neoliberalism, Brexit (and Bernie) - Boing Boing ( boingboing.net )
- [Jun 28, 2016] Brexit wins. An illusion dies ( medium.com )
- [Jun 27, 2016] Brexit Pulling the Signal Out of the Noise ( www.nakedcapitalism.com )
- [Jun 21, 2016] Depressing Similarities Between 1938 And The Present ( www.benzinga.com )
- [Jun 20, 2016] Year over year declines are leading the actual production data and indicate that the drop in production will march on much further even if drilling resumes ( peakoilbarrel.com )
- [Jun 19, 2016] I find it interesting that the U.S. Energy Sector now has twice as much debt as it did ten years ago at $370 billion as production declines. ( peakoilbarrel.com )
- [Jun 19, 2016] Without close to hundred dollar per barrel oil prices US is doomed ( peakoilbarrel.com )
- [Jun 19, 2016] Lysenkoism and climate change ( peakoilbarrel.com )
- [Jun 19, 2016] Higher borrowing costs and tighter lending standards will act to restrain growth in the Bakken going forward ( peakoilbarrel.com )
- [Jun 19, 2016] Where we are in the cycle ( peakoilbarrel.com )
- [Jun 19, 2016] There will the first significant stock draw of natural gas this summer, which for sure will have an impact on prices. ( peakoilbarrel.com )
- [Jun 19, 2016] I was rather surprised by the modest declines those last two months. ( peakoilbarrel.com )
- [Jun 19, 2016] Catch 22 in oil production: only a fraction of current oil reserves will ever be recovered and the true amount will never matrialize ( peakoilbarrel.com )
- [Jun 19, 2016] The Disgraceful Episode Of Lysenkoism Brings Us Global Warming Theory ( Apr 28, 2013 | Forbes )
- [Jun 19, 2016] US economy just 'doesn't want to grow up' BofA's Contopoulos ( www.cnbc.com )
- [Jun 19, 2016] The Bakken was down 69,420 barrels per day in April ( peakoilbarrel.com )
- [Jun 19, 2016] Global oil industry's retrenchment tops a staggering one trillion ( www.cnbc.com )
- [Jun 18, 2016] The current cycle lasts roughly two times longer than the cycle in 2008/9 ( peakoilbarrel.com )
- [Jun 18, 2016] Endgame for US shale ( peakoilbarrel.com )
- [Jun 18, 2016] It seems that we will see further declines in LTO output in the next several months due to delayed impact of low oil prices. ( peakoilbarrel.com )
- [Jun 18, 2016] Global oil industry's retrenchment tops a staggering one trillion ( www.cnbc.com )
- [Jun 18, 2016] What Goldman does with its forecasts should be illegal! ( Cblockquote%3Ehttp: )
- [Jun 18, 2016] Whats Really Happening to the Humanities Under Neoliberalism? ( www.truth-out.org )
- [Jun 18, 2016] North Dakota down over 70K bpd in April ( Peak Oil Barrel )
- [Jun 18, 2016] Greenspan Shocked Disbelief ( October 24, 2008 | truthout.org )
- [Jun 15, 2016] Production of oil increasing while exports stayed flat due to groqwing demand in oil importing coutries, which like the USA and Canada which are also oil producting countries ( peakoilbarrel.com )
- [Jun 15, 2016] Oil Industry to Cut $1 Trillion in Spending After Price Fall ( Bloomberg )
- [Jun 11, 2016] Oil market is back in balance ( peakoilbarrel.com )
- [Jun 08, 2016] Current cuts in capex will be felt 2-3 years from now. ( peakoilbarrel.com )
- [Jun 08, 2016] Peak Oil Review - June 6 2016 ( www.resilience.org )
- [Jun 07, 2016] How close is the end of shale industry in the USA ( peakoilbarrel.com )
- [Jun 07, 2016] Short-Term Energy Outlook June 2016 ( U.S. Energy Information Administration (EIA) )
- [Jun 06, 2016] To me Saudis recent posturing is about setting up excuses for post peak declines, without having to admit they dont have as much oil as theyve stated. ( peakoilbarrel.com )
- [Jun 06, 2016] The US prediction is for a gentle decline of about 15 percent overall to 2021, but if a lot of the smaller producers get shut down in the near term it might be a bit steeper. ( peakoilbarrel.com )
- [Jun 06, 2016] Trends in oil supply and demand ( econbrowser.com )
- [Jun 04, 2016] The Baker Hughes Rig Counr is out. Oil rig count up 9, gas rig count down 5 ( peakoilbarrel.com )
- [Jun 03, 2016] Oil prices crush lures US drivers back into gas guzzlers ( peakoilbarrel.com )
- [Jun 03, 2016] A 'tsunami' is about to overwhelm the debt market ( finance.yahoo.com )
- [Jun 03, 2016] US gains just 38K jobs, fewest in 5 years; rate at 4.7 pct. ( finance.yahoo.com )
- [Jun 03, 2016] Jamie Dimon just sounded the alarm on auto loans ( www.cnbc.com )
- [Jun 03, 2016] Bill Gross Get ready for an entirely different market ( www.cnbc.com )
- [Jun 03, 2016] US crude oil production is now in full scale retreat ( peakoilbarrel.com )
- [Jun 02, 2016] The shameful roles played by Americas torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nations public school system ( www.nakedcapitalism.com )
- [Jun 02, 2016] The only way shale companies can resume mass drilling is paying for it with MasterCard, on installments ( peakoilbarrel.com )
- [Jun 02, 2016] Iranian Oil Is Disguising A Significant Decline In Global Production ( OilPrice.com )
- [Jun 02, 2016] Hoisted From Comments: Neoliberalism Tearing Societies Apart ( www.nakedcapitalism.com )
- [Jun 02, 2016] Offshore decline rate can reach 30 percent per yar and that mean that the sudden halt to offshore development will result in big offshore production declines ( peakoilbarrel.com )
- [Jun 02, 2016] Trump University playbooks offer glimpse of ruthless business practices ( www.theguardian.com )
- [Jun 01, 2016] The Offshore Oil Business Is Crippled And It May Never Recover ( oilprice.com )
- [May 31, 2016] Youre witnessing the death of neoliberalism – from within ( www.theguardian.com )
- [May 30, 2016] New IMF Paper Challenges Neoliberal Orthodoxy ( May 27, 2016 | nakedcapitalism.com )
- [May 30, 2016] Debt of LTO companies has been increasing progressively every single year regardless of price how can you say that CAPEX has any correlation with price ( peakoilbarrel.com )
- [May 30, 2016] Nobody knows exactly what is actually happening in the LTO industry, even those who work in that industry. Therefore, nobody can make more or less reliable forecasts about its future production volumes ( www.slideshare.net )
- [May 30, 2016] Shale oil industry a Ponzi scheme or can it boom again? ( peakoilbarrel.com )
- [May 30, 2016] How 50 dollars per barrel oil price works for the US convention oil producers ( peakoilbarrel.com )
- [May 30, 2016] The vast majority of large, conventional undiscovered oil and gas fields are offshore and are uneconomical to develop with oil prices below 80 dollars per barrel ( peakoilbarrel.com )
- [May 29, 2016] Goldman raised their price target (causing a rally in the stock) hours before underwriting a capital raise that cause a decline in Tesla's stock ( peakoilbarrel.com )
- [May 29, 2016] the average debt to cash flow ratio has increased 4 times in 2016. ( peakoilbarrel.com )
- [May 29, 2016] Sinking rig counts worldwide doesnt correspond to these fantastic planned oil production increases ( peakoilbarrel.com )
- [May 28, 2016] How Can Older Workers Compete In An Economy That Values Youth ( www.zerohedge.com )
- [May 26, 2016] Neoliberalisms Press Gangs How Markets Raise Costs ( May 24, 2016 | naked capitalism )
- [May 24, 2016] Eighty dollars per barrel might be enough for the current average LTO well to be profitable ( peakoilbarrel.com )
- [May 24, 2016] Every power center of the world knows oil is entirely decisive. It would be insane to allow it to fluctuate without efforts at explicit control. ( peakoilbarrel.com )
- [May 24, 2016] The CEO of Goldman Sachs accidentally explained why everyone hates Wall Street ( finance.yahoo.com )
- [May 24, 2016] At The Edge Of Time This is Peak Oil ( blogspot.co.uk )
- [May 21, 2016] The dirty little secret in our business is that you cannot grow production within cash flow ( peakoilbarrel.com )
- [May 21, 2016] Could Sabotage Cause A Surge In Oil Prices ( oilprice.com )
- [May 21, 2016] NetSlaves: True Tales of Working the Web ( www.amazon.com )
- [May 20, 2016] LTO companies will not be able to rump up production in 2016 because the best areas in the LTO space need 80 dollars and more to make a decent return. ( peakoilbarrel.com )
- [May 20, 2016] The current oil price collapse was due to over-production, which was a result of a four times increase of capex over the previous 10 years and was a cyclical event, ( peakoilbarrel.com )
- [May 20, 2016] Has anything really changed beyond dodgy economics and a slowing economy to prevent oil peak occuring in 2015 ( peakoilbarrel.com )
- [May 20, 2016] Gerald Friedman: How the Dogmatic Despair of Mainstream Economists Brought You Donald Trump ( May 19, 2016 | nakedcapitalism.com )
- [May 20, 2016] Shale is not viable below 80 dollars per barrel ( peakoilbarrel.com )
- [May 20, 2016] What price is needed to ramp up shale production ( peakoilbarrel.com )
- [May 20, 2016] As we moved closer to il deficit, suddenly, an extra outage will cause meaningful rallies instead of being mostly written off ( peakoilbarrel.com )
- [May 20, 2016] Goldman Responds To Goldman's Stock Offering of A Goldman-Upgraded Tesla Zero Hedge ( www.zerohedge.com )
- [May 20, 2016] Economic Models Must Account for Power Relationships ( economistsview.typepad.com )
- [May 18, 2016] Thomas Frank: What Happened To the Party of the People ( jessescrossroadscafe.blogspot.com )
- [May 18, 2016] Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating ( jessescrossroadscafe.blogspot.com )
- [May 18, 2016] Governor candidates call for audit of North Dakota Oil and Gas Division WDAY ( www.wday.com )
- [May 18, 2016] Oil Markets Balancing Much Faster Than Thought ( OilPrice.com )
- [May 17, 2016] Work starts on new pipeline bringing Azeri gas to Italy ( bakken.com )
- [May 17, 2016] Nigerian oil production drops after militant attacks ( bakken.com )
- [May 16, 2016] Governor candidates call for audit of North Dakota Oil and Gas Division WDAY ( www.wday.com )
- [May 15, 2016] While oil production in the Bakken has been in decline for more than a year, natural gas production continues to increase ( peakoilbarrel.com )
- [May 15, 2016] Those in the trenches always suffer most. ( peakoilbarrel.com )
- [May 13, 2016] Next round of ND oil production figures going to be bad ( peakoilbarrel.com )
- [May 12, 2016] Even if oil prices reach $60 per barrel, a decline of US shale still is imminent ( peakoilbarrel.com )
- [May 11, 2016] Shale business model is dead ( peakoilbarrel.com )
- [May 09, 2016] Can Iran And Saudi Arabia's Production Claims Be Believed ( OilPrice.com )
- [May 07, 2016] Is This The Biggest Red Herring In Oil Markets ( OilPrice.com )
- [May 07, 2016] Reserves replacement problem resurfaced again ( OilPrice.com )
- [May 07, 2016] Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years ( peakoilbarrel.com )
- [May 07, 2016] Haliburton following Schlumberger in pulling out of Venezuela: ( peakoilbarrel.com )
- [May 07, 2016] apolitical_paddy ( profile.theguardian.com )
- [May 06, 2016] If you think productivity increase is going to compensate for overall depletion and lack of new exploration success then I think you are wrong. ( peakoilbarrel.com )
- [May 06, 2016] apolitical_paddy ( profile.theguardian.com )
- [May 05, 2016] The number of new wells drilled in the United States has halved from 40,000, and the addition of a thousand or two thousand wells will not do much to arrest steep declines in shale production ( peakoilbarrel.com )
- [May 05, 2016] Low oil prive forever regime in of the verge of breakdown ( naked capitalism )
- [May 05, 2016] Capex cuts ( peakoilbarrel.com )
- [May 05, 2016] Oil production cut by unforseen events ( peakoilbarrel.com )
- [May 05, 2016] Early March oil production numbers show that North Dakota will likely drop below 1.1 million barrels per day for the first time since June 2014 ( peakoilbarrel.com )
- [May 05, 2016] How European Union Fiscal Rules Subverted Democracy and Institutionalized Neoliberalism ( naked capitalism )
- [May 05, 2016] Robert Reich Why Is One of Sanders Most Important Proposals Being Ignored ( April 20, 2016 | naked capitalism )
- [May 05, 2016] Why the worst of the oil rout might already be behind us ( Alberta Oil Magazine )
- [May 05, 2016] When Neoliberalism Was Young A Lookback on Clintonism before Clinton ( coreyrobin.com )
- [May 04, 2016] Of 72 percent of petroleum used is for transportation 63 percent is used by light duty vehicles ( peakoilbarrel.com )
- [May 04, 2016] Peak Fracking, Perpetually Higher Oil Prices ( May 2, 2016 | Seeking Alpha )
- [May 04, 2016] A 4.5-Million-Barrel Per Day Oil Shortage Looms Wood Mackenzie ( May 03, 2016 | OilPrice.com )
- [May 01, 2016] Why I (Belatedly) Blew the Whistle on the SECs Failure to Properly Investigate Goldman Sachs ( April 24, 2016 )
- [May 01, 2016] All of the service companies indicate that rates now are at unsustainable levels. ( peakoilbarrel.com )
- [May 01, 2016] U.S Onshore Production Sees Deep Decline, Can Offshore Offset It ( OilPrice.com )
- [Apr 30, 2016] Michael Hudson The Wall Street Economy is Draining the Real Economy naked capitalism ( www.nakedcapitalism.com )
- [Apr 30, 2016] My Top 5 Movies About Unemployment ( Christianity Today )
- [Apr 30, 2016] Over 50, Unemployed, Depressed and Powerless ( Daily Plate of Crazy )
- [Apr 30, 2016] Over 50 and unemployed Don't panic! ( January 3, 2012 | Palmetto Workforce Connections )
- [Apr 30, 2016] Over 50 and out of work Program seeks to help long-term unemployed ( Nov 16 2013 | NBC News )
- [Apr 29, 2016] A Great Opportunity To Buy Oil For The Long Term ( April 15, 2016 | OilPrice.com )
- [Apr 29, 2016] The current meme os shale companies on 30 dollars oil is how they cut their estimate of future production costs from 52 billion at the end of 2014 to 32 billion at the end of 2015, without a major proved reserve reduction ( Feb 28, 2016 | peakoilbarrel.com )
- [Apr 29, 2016] 50 percent of proved oil reserves may have just vanished ( April 27, 2016 | OilPrice.com )
- [Apr 29, 2016] Star Trek or The Matrix? Varoufakiss Challenge to Neoliberalism ( April 28, 2016 nakedcapitalism.com )
- [Apr 29, 2016] A Conversation With Joseph Stiglitz ( April 28, 2016 | economistsview.typepad.com )
- [Apr 29, 2016] Only 50 vertical rigs in the US remain active, this is just unbelievable ( peakoilbarrel.com )
- [Apr 29, 2016] Deflation of shale bubble is irreversible ( peakoilbarrel.com )
- [Apr 29, 2016] the hz wells just pull out a lot more oil up front, but likely by years 3 and on, they really do not produce much, if any, more than the vertical ( peakoilbarrel.com )
- [Apr 29, 2016] Schlumberger after posting its first North American operating loss since at least the turn of the century is evaluating whether temporarily close its business in the region. ( peakoilbarrel.com )
- [Apr 29, 2016] IMF expects $500B revenue loss for Mideast oil exporters bakken.com ( bakken.com )
- [Apr 29, 2016] The U.S. Shale Boom Was Financed By Low Interest Rates ( oilprice.com )
- [Apr 29, 2016] The Middle East may soon be the world's most active market for drilling rigs. ( OilPrice.com )
- [Apr 27, 2016] Sounds like many shale companies fracked a bunch of shale and upon well-completion, red ink flowed out. Maybe they can market it as colorant for red-dyed diesel ( peakoilbarrel.com )
- [Apr 27, 2016] Sharp drop in the USA oil production is the harbinger of things to come globally ( peakoilbarrel.com )
- [Apr 26, 2016] Oil Bulls Plunge Into Market as U.S. Gasoline Demand Hits Record ( Bloomberg )
- [Apr 26, 2016] The goldilocks price for oil ( peakoilbarrel.com )
- [Apr 25, 2016] While old supergiants would not all go into terminal decline together most of them are past peak and begin to go downhill fast soon ( peakoilbarrel.com )
- [Apr 24, 2016] Given that proved reserves are largely a function of price it is inevitable that reserves would significantly drop as price dropped ( peakoilbarrel.com )
- [Apr 24, 2016] Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting. ( www.nakedcapitalism.com )
- [Apr 24, 2016] The Great Ponzi Scheme of the Global Economy ( www.counterpunch.org )
- [Apr 24, 2016] Will the Upheaval in Fossil Fuel Industry Take the Rest of the Economy Down With It? ( April 23, 2016 | nakedcapitalism.com )
- [Apr 24, 2016] Much broader and flatter Hubert curve is frequently mis-characterized as an undulating plateau ( peakoilbarrel.com )
- [Apr 24, 2016] The increase of 4 million barrel per day of shale oil production has not been paid for yet while shale decline rate is horrific and it costs upwards of 90 dollars a barrel per barrel ( peakoilbarrel.com )
- [Apr 24, 2016] Crude Oil Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production ( US GAO )
- [Apr 24, 2016] The End of Neoliberalism ( The Disaffected Lib )
- [Apr 24, 2016] What Can Replace Neoliberalism ( addisfortune.net )
- [Apr 24, 2016] There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week ( peakoilbarrel.com )
- [Apr 24, 2016] Red Queen Effect ( contextearth.com )
- [Apr 24, 2016] Neoliberalism as the Agent of Capitalist Self-Destruction ( salvage.zone )
- [Apr 23, 2016] LTO output drops by some 35% in 12 months if no new wells are completed ( peakoilbarrel.com )
- [Apr 23, 2016] This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil ( www.nakedcapitalism.com )
- [Apr 23, 2016] The end of cheap oil probably means end of neoliberalism ( www.nakedcapitalism.com )
- [Apr 23, 2016] Sometime between 2018 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time). ( peakoilbarrel.com )
- [Apr 22, 2016] Report ( www.theguardian.com )
- [Apr 22, 2016] MoreNotLess ( profile.theguardian.com )
- [Apr 22, 2016] Neoliberalism – the ideology at the root of all our problems ( April 15, 2016 | The Guardian )
- [Apr 17, 2016] Towards a Theory of Shadow Money ( April 16, 2016 | www.nakedcapitalism.com )
- [Apr 17, 2016] At the rate the US rig count is dropping we should be negative territory around October ( peakoilbarrel.com )
- [Apr 17, 2016] US oil production might be down around 30% by year end ( peakoilbarrel.com )
- [Apr 17, 2016] Credentialism and Corruption: Neoliberalism as Lived Experience ( www.nakedcapitalism.com )
- [Apr 16, 2016] OPEC Report Suggests Massive Oil Price Rebound ( finance.yahoo.com )
- [Apr 13, 2016] Shale is in a position of zugzwang ( peakoilbarrel.com )
- [Apr 13, 2016] The dead end of neoliberal transformation of the USA society ( economistsview.typepad.com )
- [Apr 13, 2016] Shale industry is against the wall high declining wells and 50 dollars per barrel might not save them ( peakoilbarrel.com )
- [Apr 13, 2016] Annualized drop by almost two billion barrels a day is expected in the USA ( peakoilbarrel.com )
- [Apr 12, 2016] 70-90% Decline In Well Completions Raises Hope For Oil Gas ( OilPrice.com )
- [Apr 11, 2016] Why Low Oil Prices Haven't Helped The Economy ( OilPrice.com, )
- [Apr 11, 2016] Paul Krugman: Snoopy the Destroyer ( economistsview.typepad.com )
- [Apr 11, 2016] #panamapapers Offshore Funds: On the Run With (Almost) Nowhere to Go? ( www.nakedcapitalism.com )
- [Apr 11, 2016] Not only KSA but most of the global production has been maintained from old depleted wells, using new techologies to sweep up remnants of trapped oil. ( peakoilbarrel.com )
- [Apr 11, 2016] Whats Behind The Revolt Against Global Integration? ( economistsview.typepad.com )
- [Apr 10, 2016] Possibility of Seneca cliff in oil production ( peakoilbarrel.com )
- [Apr 10, 2016] Follow the money ( economistsview.typepad.com )
- [Apr 10, 2016] Saudi Oil Gambit Moves to Phase Two ( Bloomberg )
- [Apr 10, 2016] The Repercussions of Financial Booms and Crises ( March 29, 2016 | Angry Bear )
- [Apr 09, 2016] Share dilution hits oil equity investors with almost 9 billion of equity issued already in the first quarter of this year ( peakoilbarrel.com )
- [Apr 08, 2016] The importance of low oil price regime for maintaining neoliberal status quo ( peakoilbarrel.com )
- [Apr 08, 2016] Secular stagnation The long view ( www.economist.com )
- [Apr 07, 2016] How Cults Manipulate People ( www.aibi.ph )
- [Apr 06, 2016] Production potential of all shale plays in the U.S. has been vastly exaggerated for political and propaganda reasons is unchanged and now supported by sufficient data ( peakoilbarrel.com )
- [Apr 05, 2016] There is going to be much more carnage in the oil patch ( peakoilbarrel.com )
- [Apr 05, 2016] $120 Oil As Soon As 2018 ( oilprice.com )
- [Apr 02, 2016] Unemployment Rate Edges Higher as Prime-Age Workers Reenter Labor Market ( April 01, 2016 | Economist's View )
- [Apr 02, 2016] Where are new oil deposits even at 120 dollars per barrel ( peakoilbarrel.com )
- [Apr 02, 2016] U.S. Light Vehicle Sales decline to 16.45 million annual rate in March ( www.calculatedriskblog.com )
- [Apr 02, 2016] Thomas Frank How Democrats Created Liberalism of the Rich naked capitalism ( www.nakedcapitalism.com )
- [Apr 01, 2016] Half of continental US oil production comes from new wells ( bakken.com )
- [Mar 30, 2016] India consumed 4.2 million barrels per day in 2016, overtaking Japan as the world's third largest oil consumer ( www.bloomberg.com )
- [Mar 29, 2016] Oil bust claims another 1,100 jobs across Texas ( Fuel Fix )
- [Mar 29, 2016] The Boom and Bust of Sub Prime Oil ( peakoilbarrel.com )
- [Mar 29, 2016] Does Saudi Arabia's Play For Market Share Make Sense ( www.zerohedge.com )
- [Mar 29, 2016] Robert Shiller We're not in a housing bubble yet ( finance.yahoo.com )
- [Mar 28, 2016] Major producers reduce capital spending and cut their drilling programs significantly in some instances ( peakoilbarrel.com )
- [Mar 27, 2016] In 2015, the seven biggest publicly traded Western energy companies replaced just 75 percent of the oil and natural gas they pumped ( peakoilbarrel.com )
- [Mar 24, 2016] EIA reports that US production is down 30 thousand barrela a day ( peakoilbarrel.com )
- [Mar 24, 2016] Why We Could See An Oil Price Shock In 2016 ( Mar 24, 2016 | OilPrice.com )
- [Mar 23, 2016] Cruz Seeks Economic Wisdom in the Wrong Place ( economistsview.typepad.com )
- [Mar 23, 2016] How to Lay Off An Employee - the Right Way ( Alberta Oil Magazine )
- [Mar 23, 2016] It's not a bull or a bear market, it's a bunny ( finance.yahoo.com )
- [Mar 22, 2016] In Canada drillers do not have enough cash flow to plug abandoned wells and ask for federal assistance ( peakoilbarrel.com )
- [Mar 22, 2016] Share Buybacks Turn Toxic ( www.zerohedge.com )
- [Mar 21, 2016] Alarmists are very big on character assassination based on fact-less opinions ( peakoilbarrel.com )
- [Mar 21, 2016] IEA as the key player in staging oil price drop by creating a false impression of glut via manipulated statistics ( peakoilbarrel.com )
- [Mar 20, 2016] Some forecast just dont pan out as expected. ( peakoilbarrel.com )
- [Mar 20, 2016] Light tight oil is not your average crude oil ( peakoilbarrel.com )
- [Mar 16, 2016] bonuses earned by the CEOs of the major shale oil producers were tied to the level of production, not profits ( peakoilbarrel.com )
- [Mar 16, 2016] The Fed caused 93% of the entire stock market's move since 2008 Analysis ( finance.yahoo.com )
- [Mar 16, 2016] GDP never measures economic efficiency of the country ( peakoilbarrel.com )
- [Mar 16, 2016] 03/15/2016 at 4:46 pm ( peakoilbarrel.com )
- [Mar 15, 2016] Coal probably has peake ( )
- [Mar 15, 2016] How do human CO2 emissions compare to natural CO2 emissions ( www.skepticalscience.com )
- [Mar 14, 2016] Theres Only One Buyer Keeping S P 500s Bull Market Alive ( Bloomberg Business )
- [Mar 14, 2016] OPEC sees lower 2016 demand for its oil, pointing to higher surplus ( finance.yahoo.com )
- [Mar 11, 2016] The question is not to generate doubt about AGW, it is to show that science has not decided about the CO2 hypothesis despite claims to the contrary, and to tell people that they have nothing to fear from the climate so they can have one worry less. ( peakoilbarrel.com )
- [Mar 11, 2016] IPCC does not believe sea level rise has shown any acceleration during the 20th century. ( peakoilbarrel.com )
- [Mar 11, 2016] An impartial observer would acknowledge that global warming has been very beneficial to humanity, as the LIA was a terrible time and millions died because of pre-industrial climate ( peakoilbarrel.com )
- [Mar 11, 2016] no title ( peakoilbarrel.com )
- [Mar 11, 2016] Energy Crisis As Early As 2016 ( December 30, 2014 | OilPrice.com )
- [Mar 11, 2016] North Dakota – update until 2016-01 – Visualizing US shale oil production ( shaleprofile.com )
- [Mar 11, 2016] Manking probably has 50 years to go on fossil fuel ( peakoilbarrel.com )
- [Mar 10, 2016] This Is Jeff Gundlachs Favorite ( Scariest) Chart Zero Hedge ( www.zerohedge.com )
- [Mar 10, 2016] Is It All Over Now? Producers Lose Their Appetite For Bakken Crude Output ( rbnenergy.com )
- [Mar 10, 2016] NE gas production will fall by the end of the year, just for slightly different reasons ( peakoilbarrel.com )
- [Mar 09, 2016] Everyone including Saudi Arabia and Kuwait, is losing money at current prices with the industry is losing around two billion per day ( peakoilbarrel.com )
- [Mar 08, 2016] Oklahoma Sets New Limits For Oil And Gas Drillers To Halt Earthquakes ( www.huffingtonpost.com )
- [Mar 08, 2016] Donald Trump ( www.theguardian.com )
- [Mar 08, 2016] Henry Giroux on State Terrorism and the Ideological Weapons of Neoliberalism ( www.truth-out.org )
- [Mar 08, 2016] US Oil Rig Count Points To A Sharp Decline In Production ( peakoilbarrel.com )
- [Mar 07, 2016] How Traders Benefit from the Crude Oil Contango Market - Market Realist ( Feb 5, 2016 | marketrealist.com )
- [Mar 07, 2016] What is it like being an oil trader? ( www.bbc.com )
- [Mar 07, 2016] Energy policy expert says oil slump is a 'bust' ( www.daily-times.com )
- [Mar 07, 2016] Looks like the range of oil prices below $70 which represents the "death valley" for US LTO production also exists for UK North Sea fields. ( peakoilbarrel.com )
- [Mar 07, 2016] US Oil Rig Count Points To A Sharp Decline In Production ( Peak Oil Barrel )
- [Mar 06, 2016] Galbraith Attack on Sanders Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible ( March 6, 2016 | naked capitalism )
- [Mar 06, 2016] Exxon CEO Industry mired in debt has destroyed value, "encumbered" U.S. oil resources ( fuelfix.com )
- [Mar 04, 2016] Legendary billionaire investor Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months ( www.zerohedge.com )
- [Mar 04, 2016] In their fanatical crusade against Russia, the EU countries have opted for a catastrophic energy policy that has rendered them global economic growth laggards ( peakoilbarrel.com )
- [Mar 04, 2016] If the US Has Too Much Oil. So Why Are Imports Rising ( www.zerohedge.com )
- [Mar 04, 2016] shale gas production will peak in 2017 nationwide and then begin a rapid productivity decline ( peakoilbarrel.com )
- [Mar 04, 2016] What do you call a 50 year old engineer? ( www.nakedcapitalism.com )
- [Mar 03, 2016] The meeting of oil-producing countries will be held on March 20th in Russia ( peakoilbarrel.com )
- [Mar 03, 2016] Russia can not replace the European customers but US neocons are trying to kick Russia out of Europe ( peakoilbarrel.com )
- [Mar 02, 2016] But, nuclear power is a solid power generator, and will take over if fossil fuels start to wane. ( peakoilbarrel.com )
- [Mar 02, 2016] Bakken LTO needs $80 WTI, minimum, to be a good investment ( peakoilbarrel.com )
- [Mar 02, 2016] US shale oil production might going to fall off of a cliff over the next 2 to 6 months ( peakoilbarrel.com )
- [Mar 02, 2016] All this idiotism with drilling while having negative cash flow will eventually stop. ( peakoilbarrel.com )
- [Mar 02, 2016] There are DUCs because there is always a delay between when the drillers finish their work and when the frackers start their work ( peakoilbarrel.com )
- [Mar 02, 2016] Hedge funds turn bullish on Brent but not WTI ( Reuters )
- [Mar 02, 2016] There will be no large increase on shale oil production until the price stays over 70 dollars bbl for a while. ( peakoilbarrel.com )
- [Mar 01, 2016] EUR of Ballen Wells is around 320000 bbl ( peakoilbarrel.com )
- [Mar 01, 2016] Method of calculation of EUR of Bakken wells ( seekingalpha.com )
- [Mar 01, 2016] EUR of Bakken wells ( peakoilbarrel.com )
- [Mar 01, 2016] Shale companies output is expected to drop from 300000 to 6000 bbl in 2016 ( peakoilbarrel.com )
- [Mar 01, 2016] Seeking Alpha - Read, Decide, Invest. ( seekingalpha.com )
- [Feb 29, 2016] Based on old data of 2007 we use close to half for passenger travel, and only 2 percent of oil for farm use ( peakoilbarrel.com )
- [Feb 29, 2016] US Oil Rig Count Points To A Sharp Decline In Production ( Peak Oil Barrel )
- [Feb 28, 2016] Eagle Ford rig count down 70 percent in the last year ( fuelfix.com )
- [Feb 28, 2016] A new Art Berman presentation propages MSM myth OMG Cushing is almost full ( peakoilbarrel.com )
- [Feb 28, 2016] Cost reductions in shale patch are nowhere near 40 to 60 percent myth that is propagated by corrupt MSM ( peakoilbarrel.com )
- [Feb 28, 2016] The Ogre the Cog A Tale of Modern Misallocation naked capitalism ( www.nakedcapitalism.com )
- [Feb 28, 2016] Oil Giant Cuts Budget By 80 percent And Suspends Fracking ( OilPrice.com )
- [Feb 28, 2016] The New Oil-Storage Space Railcars ( Feb. 28, 2016 | WSJ )
- [Feb 28, 2016] Nigerian president tells Qatar's ruler Oil prices have fallen to totally unacceptable levels ( Peak Oil News and Message Boards )
- [Feb 28, 2016] Running at a loss is one thing, bleeding cash at a loss is something else and far worse ( peakoilbarrel.com )
- [Feb 28, 2016] No sign of Peak Oil ( Peak Oil News and Message Boards )
- [Feb 28, 2016] Trump defends Trump University from Rubio, Cruz attacks ( finance.yahoo.com )
- [Feb 28, 2016] Is An Un-Great America Headed For The Abyss Warren Buffett Says No The Two-Way ( NPR )
- [Feb 28, 2016] Shale producers will continue pumping untel default on thier bonds ( peakoilbarrel.com )
- [Feb 28, 2016] European banks has 200 billion dollars or more exposure to the US oil and gas sector ( fuelfix.com )
- [Feb 28, 2016] Shale bust claims another 13 oil rigs, Baker Hughes says ( Feb 28, 2016 | Fuel Fix )
- [Feb 28, 2016] Russia predicts a shortage of oil in four years ( 24.02.2016 | Die Welt/InoSMI )
- [Feb 28, 2016] The USA want to limit Russian supplies of energy to Europe by all means possible ( fuelfix.com )
- [Feb 27, 2016] Watch five years of oil drilling collapse in seconds. The oil crash has taken its toll. ( www.bloomberg.com )
- [Feb 27, 2016] China's crude production for January is down two percent year on year ( peakoilbarrel.com )
- [Feb 27, 2016] The End of Normal by James Galbraith ( peakoilbarrel.com )
- [Feb 27, 2016] The Oil Drum Modeling Bakken Oil Production The Oil Shock Model Explained ( www.theoildrum.com )
- [Feb 27, 2016]
Gazprom plant weitere Pipeline nach Europa (
- [Feb 27, 2016] Contango appears to be in place for nat gas. ( peakoilbarrel.com )
- [Feb 26, 2016] Individual Bakken wells have little long-term capacity, so that the decline effects are seen almost immediately ( peakoilbarrel.com )
- [Feb 26, 2016] Conventional onshore lower 48 oil and gas is dying ( peakoilbarrel.com )
- [Feb 26, 2016] The idea that oil and natural gas will stay below $50 and $2.50 does not appear to be possible in my view ( peakoilbarrel.com )
- [Feb 25, 2016] Drilling with negative cash flow almost stopped ( peakoilbarrel.com )
- [Feb 25, 2016] There was a governing quality of human input that's been lost in the market, that sort of prevented this kind of lunacy that is currently happening in oil markets ( www.bloomberg.com )
- [Feb 25, 2016] Here is a reason the shale player maybe holding onto there production number so eagerly. ( peakoilbarrel.com )
- [Feb 25, 2016] Oil prices as major drivers for oil production. ( peakoilbarrel.com )
- [Feb 25, 2016] Problems with oil glut theory ( peakoilbarrel.com )
- [Feb 25, 2016] Capitulation of shale driller is coming in a month or two ( peakoilbarrel.com )
- [Feb 24, 2016] Why Commodities Prices are Bouncing Higher ( dailyreckoning.com.au )
- [Feb 23, 2016] EIA, analysts U.S. shale will rebound ( Fuel Fix )
- [Feb 23, 2016] As 2017 oil rebounds to $45, U.S. drillers begin to hedge anew Reuters ( www.reuters.com )
- [Feb 23, 2016] Pipeline sector is the next domino to fail ( peakoilbarrel.com )
- [Feb 23, 2016] As U.S. shale sinks, pipeline fight sends woes downstream ( Reuters )
- [Feb 23, 2016]
Shale Oil Architect Predicts Doom for Some Drillers Amid Slump ( Feb 23, 2016 |
Bloomberg Business )
- [Feb 23, 2016]
Consumption of natural gas for power generation (power burn) in Texas is at a record high (
- [Feb 23, 2016] Former EOG CEO predicts carnage will breed caution for U.S. shale ( Fuel Fix )
- [Feb 23, 2016] Natural Gas Price Increase Inevitable in 2016 Art Berman ( www.artberman.com )
- [Feb 22, 2016] At some point a "Minsky moment" may occur in the LTO sector ( peakoilbarrel.com )
- [Feb 22, 2016] The market is pricing ALL shale companies as if the price of oil is $70 per barrel ( peakoilbarrel.com )
- [Feb 22, 2016] Did multi-stage horizontals make producing from unconventional reservoirs possible? Of course. Did they make it economic? Only when oil was over 100 dollars per barrel ( peakoilbarrel.com )
- [Feb 21, 2016] Minskys financial instability hypothesis ( Wikipedia )
- [Feb 21, 2016] Oil shortage is on the horizon: world oil production is trending down ( peakoilbarrel.com )
- [Feb 21, 2016] What we experienced in July 2014 can probably be called Minsky moment for oil industry ( peakoilbarrel.com )
- [Feb 21, 2016] The Oracle of Oil A Maverick Geologist's Quest for a Sustainable Future ( Amazon.com )
- [Feb 20, 2016] Oil output freeze deal talks should end by March 1, says Russian minister ( Reuters.com )
- [Feb 20, 2016] In no way oil producers determine oil prices, they are all determined by traders ( peakoilbarrel.com )
- [Feb 20, 2016] There are 3100 wells in the Williston Basin that are producing 40 bpd and less and they are all losing money ( peakoilbarrel.com )
- [Feb 20, 2016] ExxonMobils reserve-replacement ratio for 2015 is only 67 percent ( peakoilbarrel.com )
- [Feb 20, 2016] Weakness in prices for crude oil and natural gas has caused a fundamental change in the energy industry, ( peakoilbarrel.com )
- [Feb 20, 2016] Now Wall Street is keeping shale companies by the balls as the level of debt does not allow to cut production which would rebalance the market ( peakoilbarrel.com )
- [Feb 20, 2016] Any increase of shale oil production also increases consumption of diesel fuel ( www.theoildrum.com )
- [Feb 20, 2016] US shale gas bluff: combined net natural gas exports from the US and Australia to Europe would be approximately zero.Such a replacement for Russian gas ( peakoilbarrel.com )
- [Feb 20, 2016] Which companies are most likely to survive this low price environment ( peakoilbarrel.com )
- [Feb 20, 2016] If oil price does not jump this year a lot of shale companies will not survive and lending is now cut off ( peakoilbarrel.com )
- [Feb 20, 2016] Columbia SIPA Center on Global Energy Policy Global Oil Market Forecasting Main Approaches Key Drivers ( energypolicy.columbia.edu )
- [Feb 20, 2016] For those interested in Bakken economics, take a look at Enerplus release today ( peakoilbarrel.com )
- [Feb 20, 2016] Any increase of shale oil production increase consumption of diesel fuel ( www.theoildrum.com )
- [Feb 19, 2016] Stories drive the market, just like our lives and oil glut myth is one of the keys to the current oil price slump ( peakoilbarrel.com )
- [Feb 19, 2016] Marathon oil lost money last quarter and have cut exploration spending more then ten times compared to 2014 ( peakoilbarrel.com )
- [Feb 19, 2016] Baker rig count is out and another 27 rigs are gone ( peakoilbarrel.com )
- [Feb 19, 2016] I am sensing an emerging consensus to just bite the bullet and bring production down as fast as possible unless a lender forces the issue ( peakoilbarrel.com )
- [Feb 18, 2016] Sudden Death Junk-Rated Companies Headed for Biggest Refinancing Cliff Ever – Moodys ( naked capitalism )
- [Feb 18, 2016] U.S. mining and exploration investment declined 35% in 2015 ( www.eia.gov )
- [Feb 18, 2016] How much CapEx was spent from 2005 to 2014 in oil industry ( peakoilbarrel.com )
- [Feb 18, 2016] US shale will still be in deep troubles even if price return to 50 dollars per barrel in 2016, the wave of bankruptcies looks unavoidable ( peakoilbarrel.com )
- [Feb 17, 2016] Fracking wastewater causes cancer ( )
- [Feb 17, 2016] Saudi Arabia, Russia to Freeze Oil Output Near Record Levels ( Bloomberg Business )
- [Feb 17, 2016] Fair price for oil is $130 will be, despite Saudi attempts - World Bank consultant ( www.rt.com )
- [Feb 17, 2016] The recent collapse of the bond market starts affecting US shale oil production ( peakoilbarrel.com )
- [Feb 17, 2016] From Oil Glut to Shortage ( peakoilbarrel.com )
- [Feb 16, 2016] High risk of bankruptcy for one-third of oil firms: Deloitte ( peakoilbarrel.com )
- [Feb 16, 2016] KPI says oil prices could reach $50 a barrel mid-2017 ( Al Arabiya )
- [Feb 16, 2016] How Right-Wing Billionaires Infiltrated Higher Education ( February 12, 2016 | The Chronicle of Higher Education )
- [Feb 16, 2016] Those damned NGO's (charities) that see it as their first mission to buy Toyota Landcruisers to ensure their pompous leaders can be carried in perfect comfort from one five star conference to another ( peakoilbarrel.com )
- [Feb 15, 2016] Access to cheap money was one of the key factors that contributed to the shale boom ( peakoilbarrel.com )
- [Feb 15, 2016] A Slippery Slope Indeed ( February 14, 2016 | angrybearblog.com )
- [Feb 14, 2016] Paragon Offshore filing Chapter 11 might well be the largest bankruptcy for offshore drillers so far ( peakoilbarrel.com )
- [Feb 14, 2016] Oil glut myth as the trigger of oil price manipulation ( peakoilbarrel.com )
- [Feb 13, 2016] World petroleum liquids production is dropping ( peakoilbarrel.com )
- [Feb 13, 2016] Armenia-Iran Deal May Threaten Russia's Natural Gas Market ( 11 February 2016 | OilPrice.com )
- [Feb 13, 2016]
with its rapid decline rate and high costs can not act as a cap on the price of oil ( peakoilbarrel.com )
- [Feb 12, 2016]
Goldman sharks wants to drive oil price to teens and royally fleece oil producers (
- [Feb 12, 2016] Central Banks Are Trojan Horses, Looting Their Host Nations ( Zero Hedge )
- [Feb 12, 2016] Is this a casino capitalism or some dreamed up world where supply-demand model is the law of the land? ( peakoilbarrel.com )
- [Feb 10, 2016] IEA sees no oil price rally in the short term ( OilPrice.com )
- [Feb 10, 2016] World needs to produce around 3 million barrels a day to compensage for annual decline of existing wells ( peakoilbarrel.com )
- [Feb 09, 2016] Stung by Low Oil Prices, Companies Face a Reckoning on Debts ( The New York Times )
- [Feb 09, 2016] CHK, junk bonds and market manipulation ( peakoilbarrel.com )
- [Feb 09, 2016] It was like watching the paint dry but now there are signs of US production stall due to low oil prices ( peakoilbarrel.com )
- [Feb 09, 2016] Oil prices are being driven down by cheap money and overinstamnt ( finance.yahoo.com )
- [Feb 09, 2016] Computerized Trading Creating Oil Price Volatility ( Zero Hedge )
- [Feb 09, 2016] Stability breeds instability ( Economist's View )
- [Feb 09, 2016] All this obsession with miniscule rate changes has obscured the need for the Fed and politicians to make significant changes ( February 08, 2016 | economistsview.typepad.com )
- [Feb 09, 2016] Those who can both be right and sit tight are uncommon. I found it one of the hardest things to learn ( jessescrossroadscafe.blogspot.com )
- [Feb 08, 2016] Another 6,000 Jobs Eliminated In Oilfield Services Sector ( OilPrice.com )
- [Feb 08, 2016] Will Oil Prices Rebound in 2016? Interview With Carl Larry ( January 20, 2016 | finance.yahoo.com )
- [Feb 08, 2016] Chesapeake has hired Kirkland and Ellis as its bankruptcy attorney which a typical step before formal Chapter 11 filing ( peakoilbarrel.com )
- [Feb 08, 2016] Peak-Oil Predictions Didn't Pan Out, But Concerns About Supply Persist As Conventional Crude Slides ( ibtimes.com )
- [Feb 08, 2016] Any system with pure time lags is inherently unstable and finance based positive feedback loop amplifies instability ( peakoilbarrel.com )
- [Feb 08, 2016] What will happen to North American oil producers if oil price stay low for 2016 ? ( peakoilbarrel.com )
- [Feb 08, 2016] Tech stock collapse sure looks like bubble popping ( finance.yahoo.com )
- [Feb 08, 2016] Momo Bad News JPMs Quant Guru Kolanovic Confirms Tech Bubble Has Burst... Again ( Zero Hedge )
- [Feb 08, 2016] GRANTHAM The stock market sell-off makes me nervous, but I fear the big crash is coming later ( finance.yahoo.com )
- [Feb 07, 2016] This year by September or October we can expect $70 dollars ( peakoilbarrel.com )
- [Feb 07, 2016] The black stuff is far too valuable to piss up the wall as we currently are ( peakoilbarrel.com )
- [Feb 07, 2016] Oil oversupply and undersupply are not only economic but also political categories as oil is a strategic product ( peakoilbarrel.com )
- [Feb 07, 2016] 2016 might well see a bigger reduction in oil production than the second half of 2015 ( peakoilbarrel.com )
- [Feb 07, 2016] Oil Production Is Going To Drop And Oil Prices Are Likely To Increase ( Peak Oil Barrel )
- [Feb 07, 2016] Citi: The Global Economy Is Trapped in a 'Death Spiral' ( February 5, 2016 | nymag.com )
- [Feb 06, 2016] Linn Energy appears to be preparing to to file for bankruptcy ( peakoilbarrel.com )
- [Feb 05, 2016] Rail shipments of oil drop considerably ( peakoilbarrel.com )
- [Feb 05, 2016] Despite Bold Predictions, T. Boone Pickens Sells All Oil Holdings ( finance.yahoo.com )
- [Feb 05, 2016] Simple formula used by MSM honchos for breakeven LTO oil price is the current WIT price minus 20 percent ( peakoilbarrel.com )
- [Feb 04, 2016] Canadian sands production is expected to increase 800 kilobarrels per day by 2020 ( www.ogj.com )
- [Feb 04, 2016] Peak Oil Review Midweek Update - Jan 28 ( www.resilience.org )
- [Feb 04, 2016] Suncor Energy Inc to cut spending by 10 persent after surprise 2 billion loss ( Peak Oil Barrel )
- [Feb 04, 2016] Oil To Mid $40s By Next Week ( Feb 03, 2016 | Forbes )
- [Feb 04, 2016] Statoil losses increased to 4 billons in 2015 ( peakoilbarrel.com )
- [Feb 04, 2016] Many Canadaian oil-sands operations are unprofitable ( peakoilbarrel.com )
- [Feb 04, 2016] Oil has 'definitely' bottomed Vedanta Resources ( finance.yahoo.com )
- [Feb 04, 2016] You won't see $70 oil until 2018 Morgan Stanley ( finance.yahoo.com )
- [Feb 04, 2016] Texas Isn't Scared of $30 Oil ( Bloomberg Business )
- [Feb 04, 2016] Oil Seen `Lower for Longer' by Morgan Stanley as Forecasts Cut ( Bloomberg Business )
- [Feb 04, 2016] Pitchfork Time Elites Have Lost Their Healthy Fear Of The Masses Zero Hedge ( www.zerohedge.com )
- [Feb 03, 2016] Oil Price Predictions for 2016 ( February 10, 2015 | www.energyandcapital.com )
- [Feb 03, 2016] Weatherford Cutting 6,000 More Jobs as Oil Downturn Worsens ( Bloomberg Business )
- [Feb 03, 2016] Oil Slump Hits Houston Home Market - ( Jan. 18, 2016 | WSJ )
- [Feb 03, 2016] Global gas market braced for price war ( FT.com )
- [Feb 03, 2016] Peak Oil Review - Feb 1 ( www.resilience.org )
- [Feb 03, 2016] Oil slide is depleting the coffers of these companies ( www.cnbc.com )
- [Feb 03, 2016] Another Wall Street statical porno published by Bloomberg ( peakoilbarrel.com )
- [Feb 03, 2016] Oil Prices Could Jump 50% by the End of 2016 ( Bloomberg Business )
- [Feb 02, 2016] 2016 Oil and Gas Outlook Deloitte US Energy and Resources ( www2.deloitte.com )
- [Feb 01, 2016] Faber Cant see another bull market in my lifetime ( www.cnbc.com )
- [Feb 01, 2016] Pickens Oil already bottomed-heres whats next ( February 01, 2016 | finance.yahoo.com )
- [Feb 01, 2016] Banks On The Hook For Bad Energy Loans ( OilPrice.com )
- [Feb 01, 2016] Politics Oil - What The President Failed To Mention In His Address To Congress ( OilPrice.com )
- [Feb 01, 2016] Debt and Us economy ( peakoilbarrel.com )
- [Feb 01, 2016] What happens to the price of oil depends on the change in the supply of oil relative to how demand for oil changes over time ( peakoilbarrel.com )
- [Jan 31, 2016] 2016 Oil Whats In Store ( www.etf.com )
- [Jan 31, 2016] Jesses Café Américain Deep State Inside Washingtons Shadowy Power Elite ( jessescrossroadscafe.blogspot.com )
- [Jan 31, 2016] Moodys Just Put Over Half A Trillion Dollars In Energy Debt On Downgrade Review ( Zero Hedge )
- [Jan 31, 2016] Deep State Inside Washingtons Shadowy Power Elite Zero Hedge ( www.zerohedge.com )
- [Jan 30, 2016] Weak Economy Could Stifle Oil Price Rally ( January 28, 2016 | OilPrice.com )
- [Jan 30, 2016] Questioning the reliability of oil production figures reported by various countries and agencies such as the IEA ( peakoilbarrel.com )
- [Jan 30, 2016] How Central Banks (and Even Keynes) Misled the Public About Banking and Money ( www.nakedcapitalism.com )
- [Jan 29, 2016] Wood Mackenzie analysys suggests that oil price floor in the longer term of above 70 dollars per barrel ( peakoilbarrel.com )
- [Jan 29, 2016] Officials from the International Monetary Fund and the World Bank are heading to Azerbaijan to discuss a possible $4bn emergency loan package ( peakoilbarrel.com )
- [Jan 29, 2016] Continental Resources 2016 Guidance Oil Price Impact ( OilPrice.com )
- [Jan 29, 2016] Think about this low oil prices not as savings for US consumers but as a re-distribution of 450 billions up to the top 1%. ( peakoilbarrel.com )
- [Jan 29, 2016] The Cornucopian Crowd making the same argument as the Economist Magazine writer in 1999 arguing that advances in technology have indefinitely postponed oil production peak ( peakoilbarrel.com )
- [Jan 29, 2016] With an appropriate trigger event there can be a huge oil price spike ( peakoilbarrel.com )
- [Jan 27, 2016] These Two Commodity Experts May Not Have Long To Live ( Zero Hedge )
- [Jan 27, 2016] A parallel between the subprime mortgage crash and the disorderly fall in the price of oil ( www.bloomberg.com )
- [Jan 27, 2016] The Dallas Fed was telling banks to ignore losses in their energy portfolios until further notice so as not to cause a panic. ( peakoilbarrel.com )
- [Jan 26, 2016] The World Bank has slashed its forecast for crude oil prices by $14 to $37 per barrel for 2016 ( peakoilbarrel.com )
- [Jan 26, 2016] Saving the Banks and Fabulously Enriching a Few On the Back of the Real Economy ( Jesse's Café Américain )
- [Jan 26, 2016] Public Investment: has George Started listening to Economists? ( economistsview.typepad.com )
- [Jan 25, 2016] Why oil under $30 per barrel is a major problem ( ourfiniteworld.com )
- [Jan 25, 2016] How Soon Could A Sustained Oil Price Rally Occur ( oilprice.com )
- [Jan 24, 2016]
and consumption numbers, the most important numbers for the civilization, are not reliable (
- [Jan 23, 2016] Will Irans Return Mark The Bottom For Oil ( Jan 19, 2016 | Forbes )
- [Jan 23, 2016] Watch out for this $1 trillion stock bubble ( www.cnbc.com )
- [Jan 23, 2016] Schlumbergers Terrifying Moment Of Truth About The US Energy Sector ( Zero Hedge )
- [Jan 22, 2016] I am not going to work in a job where I might get fired due to a bunch of Wall Street crooks ( peakoilbarrel.com )
- [Jan 22, 2016] Schlumbergers Terrifying Moment Of Truth About The US Energy Sector ( www.zerohedge.com )
- [Jan 22, 2016] Oil Options Show Not Everyone Buys Lower for Longer ( Jan 21, 2016 | maritime global news )
- [Jan 21, 2016] Fears of Venezuela Default Grow Amid Drop in Oil Prices ( peakoilbarrel.com )
- [Jan 20, 2016] US Oil Futures Plunge by Nearly 7%, to $26.55 a Barrel; Stocks Swoon ( naked capitalism )
- [Jan 20, 2016] New commodities bull market in late 2016 Goldman ( finance.yahoo.com )
- [Jan 20, 2016] Goldman Sachs Sees Oil Markets Turning Bullish Soon ( finance.yahoo.com )
- [Jan 20, 2016] How The Banks Are Tightening The Noose On U.S. Oil Firms ( Zero Hedge )
- [Jan 20, 2016] Oil below $30 fans wipeout fears among U.S. shale survival artists ( news.yahoo.com )
- [Jan 19, 2016] Fund manager who's been right on oil has a depressing new prediction ( MarketWatch )
- [Jan 18, 2016] Big banks brace for oil loans to implode ( money.cnn.com )
- [Jan 18, 2016] Texas Oil and Gas Production Declining - Peak Oil BarrelPeak Oil Barrel ( peakoilbarrel.com )
- [Jan 18, 2016] When successful investors warn of a global market crash, we should all be nervous ( www.newstatesman.com )
- [Jan 17, 2016] Non OPEC oil output in 2016 can decline 2 millions bpd ( peakoilbarrel.com )
- [Jan 17, 2016] The Price of Oil, China, and Stock Market Herding ( economistsview.typepad.com )
- [Jan 17, 2016] Oil and US share prices tumble over fears for global economy ( www.theguardian.com )
- [Jan 17, 2016] In the second half of 2016 the market hopefully might rebalance ( peakoilbarrel.com )
- [Jan 17, 2016] Oil price woes deepen as Iran vows to add 500,000 barrels a day ( www.theguardian.com )
- [Jan 16, 2016] Is this the end of the bull market? ( www.cbsnews.com )
- [Jan 16, 2016] Welcome to a new era of volatility on Wall Street ( www.cbsnews.com )
- [Jan 16, 2016] Arthur Berman Why The Price Of Oil Must Rise ( www.resilience.org )
- [Jan 16, 2016]
Possible Fed intervention into shale oil junk bond crisis (
- [Jan 16, 2016]
Exclusive Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears (
Zero Hedge )
- [Jan 15, 2016] Expect 30 percent decrease from 7 to 5 million bpd of US onshore oil production in 2016 ( peakoilbarrel.com )
- [Jan 15, 2016] What If There Is No Fed Put - Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time ( Jan 15, 2016 | Zero Hedge )
- [Jan 15, 2016] Bill Gross' Advice To Traders As Stocks Crash ( Zero Hedge )
- [Jan 15, 2016] Canada could start posting some serious production declines from existing sources ( finance.yahoo.com )
- [Jan 15, 2016] El-Erian 'Massive' Supply Disruption to Lift Oil Prices ( finance.yahoo.com )
- [Jan 15, 2016] Art Cashin Comments On Today's Crash The Fed Will Try Anything ( Zero Hedge )
- [Jan 15, 2016] Wall St. hemorrhages as oil tumbles and China fears deepen ( finance.yahoo.com )
- [Jan 15, 2016] Long Shots Some Highly Speculative Forecasts for the Future of Energy ( Alberta Oil Magazine )
- [Jan 15, 2016] Big US banks reveal oil price damage ( FT.com )
- [Jan 15, 2016] Goldman Sachs Sees Oil Bull Market Being Born in Todays Crash ( Bloomberg Business )
- [Jan 15, 2016] The Heavy Price of Economic Policy Failures ( www.nakedcapitalism.com )
- [Jan 15, 2016] Oil Market Still Mired in Oversupply, But Crude Holds $30 Mark ( blogs.barrons.com )
- [Jan 15, 2016] How to Tell When the Oil Market Is Throwing in the Towel ( finance.yahoo.com )
- [Jan 14, 2016] The Lawyer Who Became DuPonts Worst Nightmare ( www.nytimes.com )
- [Jan 14, 2016] Neoliberalism was also economics departments orthodoxy for decades ( economistsview.typepad.com )
- [Jan 14, 2016] Energy Crisis As Early As 2016 ( oilprice.com )
- [Jan 14, 2016] Alberta Freezes Government Salaries As Canadas Oil Patch Enters Second Year Of Recession Zero Hedge ( www.zerohedge.com )
- [Jan 14, 2016] A big destruction in the income of the oil and commodity producers ( www.zerohedge.com )
- [Jan 14, 2016] The American tight oil boom was almost entirely financed by junk bonds and only made financial sense at oil prices a lot higher than they are now ( marknesop.wordpress.com )
- [Jan 14, 2016] Excess inventories will start to decrease in 2016 which might start a gradual rise in oil prices ( oilpeakclimate.blogspot.com )
- [Jan 14, 2016] North America Energy Producers Facing Layoffs, Capital Spending Cuts ( peakoilbarrel.com )
- [Jan 13, 2016] Oil drillers face $102 billion cash shortfall in 2016 - Fuel Fix ( fuelfix.com )
- [Jan 13, 2016] For Real Oil Prices, the Crash Is Even Bigger as China Fizzles ( Bloomberg Business )
- [Jan 13, 2016] Statoil CEO Expect Volatility Now, Price Spike Soon ( OilPrice.com )
- [Jan 13, 2016] 10 million bopd plus is underwater world wide ( peakoilbarrel.com )
- [Jan 13, 2016] Sell everything ahead of stock market crash, say RBS economists ( www.theguardian.com )
- [Jan 13, 2016] Three Ways to Help the Working Class ( economistsview.typepad.com )
- [Jan 13, 2016] ObamaCare's Neoliberal Intellectual Foundations Continue to Crumble ( www.nakedcapitalism.com )
- [Jan 12, 2016] IEA Short-Term Energy Outlook ( www.eia.gov )
- [Jan 12, 2016] EIA expects US crude oil production to decline 700 thousand bareel a day from December 2015 till Novemebr 2016 ( www.eia.gov )
- [Jan 12, 2016] Is EIA forcast total fake ? ( www.eia.gov )
- [Jan 12, 2016] BP to Cut 4,000 Jobs as Oil Prices Continue to Fall ( www.nytimes.com )
- [Jan 12, 2016] Goldman Sachs knows little about the oil business. They are social parasites. ( peakoilbarrel.com )
- [Jan 12, 2016] Saudis failing to drown US with oil Harold Hamm ( finance.yahoo.com )
- [Jan 12, 2016] Oil Plunge Sparks Bankruptcy Concerns ( peakoilbarrel.com )
- [Jan 12, 2016] Deep State controls that county. Voting Is for Chumps ( www.moonofalabama.org )
- [Jan 12, 2016] Iraq Warns of New Drop in Oil Prices Without Agreement to Cut Production ( sputniknews.com )
- [Jan 11, 2016] Oil Prices Not Even Close to Rock Bottom – Jim Rogers ( sputniknews.com )
- [Jan 11, 2016] January EIA Drilling Report confirms the steep decline of US shale production ( peakoilbarrel.com )
- [Jan 11, 2016] Chinas Demand for Crude is Showing Signs of Cracking ( finance.yahoo.com )
- [Jan 11, 2016]
is the Saudi news that could move oil (
- [Jan 11, 2016]
What if the
huge inventories are merely condensate. ( peakoilbarrel.com
- [Jan 11, 2016] Andy Hall Sticks To Long Oil Trade As Hedge Fund Tanks 35% ( www.valuewalk.com )
- [Jan 11, 2016]
Chinas Demand for Crude is Showing Signs of Cracking (
- [Jan 11, 2016] Oil bull Hall acknowledges high stockpiles but says prices low ( Nov 4, 2015 | Reuters )
- [Jan 11, 2016] Andy Hall Astenbeck Capital Q2 Letter The Missing Barrels ( www.valuewalk.com )
- [Jan 11, 2016]
Oil Tumbles To 11 Year Lows After Another Bank Joins $20 Crude Bandwagon (
Zero Hedge )
- [Jan 10, 2016] Gas prices could drop toward $1 a gallon ( www.usatoday.com )
- [Jan 10, 2016] Hedge fund manager Marc Lasry Positive on energy, Clinton and charity ( finance.yahoo.com )
- [Jan 10, 2016] Low oil prices could give Gulf States social problems – World Petroleum chief ( RT - SophieCo )
- [Jan 10, 2016] Crude price swings and Russian economy in 2016 ( Jan 10, 2016 | RT Business )
- [Jan 10, 2016] Neoliberalism Raises Its Ugly Head in South America: Washington Targets Venezuela, Brazil and Argentina ( www.counterpunch.org )
- [Jan 10, 2016] The Death of the Professional Are Doctors, Lawyers and Accountants Becoming Obsolete ( www.nakedcapitalism.com )
- [Jan 09, 2016] How people survive when economy dies ( peakoilbarrel.com )
- [Jan 09, 2016] Today oil made a new 12 year low which is lower than during the 2008-2009 crisis ( peakoilbarrel.com )
- [Jan 09, 2016] Overshoot The Ecological Basis of Revolutionary Change ( www.amazon.com )
- [Jan 09, 2016] Even a cursory look at things reveals the overwhelming scope of things and quickly leads to despair ( peakoilbarrel.com )
- [Jan 08, 2016] 2016 Oil Limits and the End of the Debt Supercycle ( Jan 08, 2016 | naked capitalism )
- [Jan 08, 2016] MSM noise about the $20-40 range for years to come has no any relation to reality ( peakoilbarrel.com )
- [Jan 08, 2016] If You Are An Oil Bull, Don't Look At These 2 Charts ( Zero Hedge )
- [Jan 07, 2016]
Oil Prices Seeing a Bottom Doesnt Mean Youre There (
- [Jan 07, 2016]
How the banks are quietly squeezing the weak shale oil players (
- [Jan 07, 2016] 5 of the Worst Examples of Biased and Distorted Media Coverage of Education in 2015 ( December 31, 2015 | nakedcapitalism.com )
- [Jan 06, 2016]
Oil Trades 4 Percent Lower Over Bearish Inventory Reports (
- [Jan 06, 2016] Oil is down to $34 today due to the EIA weekly report ( peakoilbarrel.com )
- [Jan 06, 2016] Another Slow Year for the Global Economy ( Jan 06, 2016 | naked capitalism )
- [Jan 06, 2016] 10 Key Energy Trends To Watch For In 2016 ( Zero Hedge )
- [Jan 06, 2016]
A great year for car sales-but a lousy one for GM and Ford stock (
- [Jan 05, 2016] Oil and Deflation ( David Stockman's Contra Corner )
- [Jan 05, 2016] Citi turns 'underweight' on US stocks ( finance.yahoo.com )
- [Jan 05, 2016] A stock-market crash of 50%+ would not be a surprise - or the worst-case scenario ( finance.yahoo.com )
- [Jan 05, 2016] BP's CEO Finally Sees Oil Prices Bottoming Out ( OilPrice.com )
- [Jan 05, 2016] Pretend to the Bitter End A Contrarian Review Of The Year Ahead ( David Stockman's Contra Corner )
- [Jan 04, 2016] Dollar Dominance Deconstructing the Myths and Untangling the Web ( Jan 04, 2016 | naked capitalism )
- [Jan 04, 2016] Kyle Bass Recommends The Energy Sector; The Time Is Now ( finance.yahoo.com )
- [Jan 04, 2016]
Kyle Bass On U.S. Oil Production Going From Glut To Deficit, The Worlds Not Ready (
- [Jan 03, 2016] Irving Berlin on Taxes ( economistsview.typepad.com )
- [Jan 02, 2016] Swift Energy declared bankruptcy today (40th USA energy company since price crash) – $1 billion assets, $1.35 billion debt ( peakoilbarrel.com )
- [Jan 02, 2016] Why Oil Prices Could Really Collapse to $20 a Barrel in 2016 ( finance.yahoo.com )
- [Jan 01, 2016] Oil to stay below $50 for two years, while other commodities rebound, Scotiabank says ( December 21, 2015 | Financial Post )
- [Jan 01, 2016] Russian analysts expect mass bankruptcy of shale companies in the USA and $50-$60 on average in 2016 ( peakoilbarrel.com )
- [Jan 01, 2016] Possibility of prolonged period of oil prices below $30 is low as in this case we should give up most of oil companies here in the USA ( peakoilbarrel.com )
- [Jan 01, 2016] Wade well into 2016 before you go bottom fishing in oil stocks ( www.marketwatch.com )
- [Jan 01, 2016] Economics Joke Time ( December 30, 2015 | naked capitalism )
- [Jan 01, 2016] Another Step Toward Oligarchic Control of America ( readersupportednews.org )
- [Aug 09, 2015] Hillary Clinton State Department Emails, Mexico Energy Reform, and the Revolving Door ( naked capitalism )
"... By #SlayTheSmaugs, an elected Bernie delegate in Philly. ..."
"... #STS believes that the billionaire class are Smaugs (the greed incarnate dragon of The Hobbit), immorally hoarding wealth for no reason beyond ego gratification. To "Slay" the Smaugs, we need a confiscatory wealth tax, stronger democratic institutions to impose it, and a shared moral agreement that #GreedIsEvil to justify it. ..."
"... More; charitable foundations are not the same thing, in many cases, as true charity. Instead foundations often function as hoard preservers as well, and enrich their leadership too. ..."
"... After a certain level of accumulation money is simply ego gratifying points, it's not money any more. ..."
"... Wealth on this scale has nothing to do with financial security or luxurious living. For the trivial, it is (as per D. Trump) a game and money is how you keep score. For the serious, it has to do with power, with the ability to affect other people's lives without their consent. That is why the Smaugs' wealth is absolutely our business. It should be understood that we're talking about taking very large amounts of money and power away from very rich people, people for whom money and power are pretty much the only things they value. It will not be pretty. ..."
"... If we fail to prevent the imposition of this transnational regime there will only be three classes of humans left: kleptocrats, their favored minions, and slaves. ..."
"... A more modern similarity of the US is Rome. Vassals have been going full retard for several years now, traitors sell international competitors military secrets while the biggest merchants buy off the Senate. ..."
"... Isn't there an idiom about cutting off the head of the snake? Once you deal with the strongest opponents, it's easier to go after the others. Too big to fail is nothing short of feeding the beast. ..."
"... I disagree strongly with your premise that some sort of pure and natural meritocracy has ever existed, or could ever exist in human society. Corrupt and oppressive people will always define as "meritorious" those qualities that they themselves possess– whether wealth, "gentle birth," "technical skills," or whatever. We all possess the same merit of being human. ..."
... ... ...
By #SlayTheSmaugs, an elected Bernie delegate in Philly.
#STS believes that the billionaire class are Smaugs (the greed incarnate dragon of
The Hobbit), immorally hoarding wealth for no reason beyond ego gratification. To "Slay" the Smaugs,
we need a confiscatory wealth tax, stronger democratic institutions to impose it, and a shared moral
agreement that #GreedIsEvil to justify it.
When Gordon Gekko proclaimed that 'Greed is Good' in 1987, it was an obvious rejection of several
millennia of teachings by traditional prophets and priests. Yet when Gekko preached greed, he was
merely reinforcing the current cultural norm; greed had already been rebranded a virtue. (Still,
the speech was to remind us Gekko was a bad guy). Consider that Madonna had proclaimed herself a
Material Girl three years earlier, and "Living Large" was cool. Conspicuous consumption is walking
the talk that greed is good.
Why had greed become good? I blame the creation of a credit-fueled culture of constant consumption
that necessarily praises coveting stuff, plus the dismantling of the regulatory state that had kept
Wall Street and wannabe oligarchs in check.
Our healthy cultural adoration of the self-made man, of respect for success, warped into worship
of the rich. They are not the same. Wealth can be inherited, stolen through fraud and other illegal
activities, or harvested from bubbles; none of these or myriad other paths to riches is due respect,
much less worship. Paired with another 80's definition-government is the problem-worshiping wealth
facilitates all the dysfunction in our government.
Remembering Greed is Evil
Thirty years later, the old social norm-the one that protected the many from the few, the one
that demonized greed as a deadly sin-is resurgent. We have a Pope who preaches against greed, and
walks his talk . We had a Presidential candidate of a major party-Bernie Sanders-who railed against
those living embodiments of greed, the Billionaire Class, and walked his talk by rejecting their
money. At the convention, he has invited delegates to four workshops, one of which is "One Nation
Now: Winning the Fight Against Racism and Greed". We have a late night comedian-John Oliver-
ridiculing the prosperity gospel
and taking on the debt
industry . We have mass consciousness rising, reflected in Occupy, the label "the 99%", BLM and
But we need more voices insisting #GreedIsEvil. We need to teach that basic message at home, in
school, and in houses of worship. We need to send the right signals in our social interactions. We
need to stop coveting stuff, and start buying with a purpose: Shopping locally, buying American,
buying green and clean, and buying less. We need to waste less, share more and build community. We
need to re-norm-alize greed as evil, make it shameful again. Then we will have redefined ourselves
as citizens, not consumers.
But make no mistake: America cannot become a just nation simply by the 99% becoming more virtuous.
The cultural shift is necessary but not sufficient, for norms alone do not deliver social and economic
justice. Shame will not slay the Smaugs; we need structural change in the political economy.
Extreme greed, the greed of Smaugs, is categorically different than the petit greed underlying
the irrational, constant consumption and the worship of wealth. Extreme greed manifests as a hoard
of wealth so great that "purchasing power" is an irrelevant concept; a hoard so great it lacks any
utility other than to be sat upon as a throne, gratifying the Smaug's ego and symbolizing his power.
That greed must be understood as an intolerable evil, something so base and malevolent that the full
power of the state must be used against it.
This essay is my contribution to the cause of returning extreme greed to its rightful place in
the pantheon of ultimate evils. Here is the thesis: extreme greed must be 'slain' by the state because
extreme greed is brutally violent.
The Stealth Violence of False Scarcity and "Cutting Corners"
Greed's violence is quiet and deadly: The violence of false scarcity and of "corner cutting".
Scarcity is not having enough because there just isn't enough to go round, like the
nearly 50 million people who don't reliably have food during the year, including 15 million kids.
False scarcity is when actually, there's plenty to go around, but people generally don't have enough
because of hoarders.
It's a concentrated version of what happened to pennies in 1999. People keeping pennies in piggy
banks created a
shortage felt throughout New York City . If only people had broken open their piggy banks, and
used their pennies, there would have been plenty of pennies in circulation, and shopkeepers wouldn't
lose money by rounding purchases down. In this piece, I'm focusing on false scarcity of dollars,
not pennies, and the maiming and premature death that results from false dollar scarcity. But the
idea is essentially the same; there's just far fewer relevant piggy banks.
By the quiet violence of 'corner cutting', I'm referring to unsafe, even deadly, workplaces that
could be safe if the employers invested in safety.
Sporadically, greed also drives overt, and sometimes profoundly bloody violence to protect the
hoard. Think of employer violence against unions and union organizers,
a la Henry Ford , or
John D. Rockefeller . Nonetheless in this country now, the violence of greed tends to be more
covert. It is that quiet violence, in both forms, I want you to hear now.
As Sanders often reminds us, in this, the richest nation in the world, nearly 50 million people
are living in poverty; roughly one in seven Americans. And as Sanders explained, in a
speech in West Virginia , 130,000 people die each and every year as a result of poverty. I have
not read the study Sanders referred to, so I don't know how much it overlaps with
of suicide that accelerated after 2006 and which appears to be correlated with financial stress.
Nor do I know how it overlaps with the
documented increase in white mortality that also appears to correlate with financial stress.
Regardless of overlap, however, each of these studies reflects the quiet violence of false scarcity.
Naked Capitalism has featured many posts documenting the damage of greed;
this is a recent one .
Chronic and acute financial stress from false scarcity maims, and kills. And Smaugs create false
scarcity to feed money to their egos and maintain their oligarchic power.
As Lambert often says, they don't call it class warfare for nothing.
But wait, you might insist, how false is the scarcity, really? How much do a few billionaires
matter? Ranting that greed is evil is all well and good, but really, can a relative handful of people
be manufacturing scarcity where there is none, shortening and taking millions of lives in the process?
Aren't you making your target too narrow in going after the Smaugs?
In order: Very false, a lot, yes and no.
The Falsity of Dollar Scarcity
In 2015 the Institute for Policy Studies determined that the
richest 20 American billionaires
had hoarded as much wealth as 152 million people had managed to scrape together combined. Think
Twenty people had hoarded $732,000,000,000. America is a nation of about 300,000,000 people. That
means 20 people could give a combined $2,370 to every American, and still hoard $1 billion each.
I'm not suggesting that's how the redistribution should be done, but it's notable that in an era
some 200 million Americans haven't been able to save $1000 for an emergency, twenty people could
give everyone over two grand while remaining fabulously wealthy.
Now, these 20 monstrous people, these full grown Smaugs, are not alone in their extreme greed.
Adding in the assets of the next 380 richest Americans brings the total wealth hoarded to $2.34 trillion.
That number is so large it's hard to process , so let's think this through.
First, imagine that we took all of that money with a confiscatory tax, except we again left each
of the 400 people with $1 billion. They would still be obscenely rich, so don't pity them.* Our tax
thus netted $1.94 trillion. Since that's still an unimaginable number, let's compare it to some recent
In December 2015, Congress funded five years' worth of infrastructure construction. Congress and
President Obama were very self-congratulatory because our infrastructure is a mess, and building
things involves good paying jobs. So, how much did five years of infrastructure building and job
$305 billion . That's less than the $400 billion we let the 400 Smaugs keep at the start of this
thought experiment. With the $1.94 trillion we imagine confiscating, we could keep building at the
2015 pace for 32 years. Or we could spend it much faster, and create an economic boom the like of
which this nation hasn't seen in generations.
Even Bernie Sanders, he of the supposedly overly ambitious, unable-to-be-paid for initiatives,
proposed spending $1 trillion on infrastructure over five years -a bit more than half what our
tax would net. (Nor did this supposed radical call for a confiscatory wealth tax to fund his plan.)
Sanders estimated his proposal would create 13 million good paying jobs. With nearly double the money,
surely we get nearly double the jobs? Let's be conservative and say 22 million.
In sum, we could confiscate most of the wealth of 400 people-still leaving them obscenely rich
with $1 billion each-and create 22 million good paying jobs over five years. But we don't; we let
the Smaugs keep their hoards intact. Now consider this is only taxing 400 people; what if we taxed
the richest 2,000 people more justly? What if we taxed corporations effectively? What if we stopped
giving corporate welfare? A confiscatory wealth tax, however, simply isn't discussed in polite company,
any more than a truly progressive income tax is, or even serious proposals to end corporate welfare.
The best we can do is agree that really, someday soon, we should end the obscenity that is the carried
False scarcity isn't simply a failure of charity, a hoarding of wealth that should be alms for
the poor. False scarcity is created through the billionaires' control of the state, of public policy.
But the quiet violence of greed isn't visited on the 99% only through the failure to pay adequate
taxes. Not even through the Smaugs' failure to have their corporations pay adequate wages, or benefits.
Predatory lending, predatory servicing, fraudulent foreclosure, municipal bond rigging, and pension
fund fleecing are just some of the many other ways immoral greed creates false scarcity.
While false scarcity has the broadest impact, it is not the only form of stealth violence used
by the billionaires in their class war against the rest of us. The Ford and Rockefeller style violence
of fists and guns may be rare in the U.S. these days, but a variant of it remains much too common:
Unsafe workplaces, the quiet violence of "cutting corners". Whether it's
the coal industry , the
industry , or the
oil industries, or myriad other industries, unsafe workplaces kill, maim and sicken workers.
Part of the political economy restructuring we must do includes transforming the workplace.
Feel the Greed
Let us remember why this stealth violence exists-why false scarcity and unsafe workplaces exist.
People who have more money than they hope to spend for the rest of their lives, no matter how
many of their remaining days are "rainy"; people who have more money to pass on than their children
need for a lifetime of financial security, college and retirement included; people who have more
money to pass on than their grandchildren need for a similarly secure life–these people insist on
extracting still more wealth from their workers, their clients, and taxpayers for no purpose beyond
vaingloriously hoarding it.
give away billions . But even so they retain billions. For what? More; charitable foundations
are not the same thing, in many cases, as true charity. Instead
foundations often function as hoard preservers as well, and enrich their leadership too.
Greed is evil, but it comes in different intensities. Petit greed is a corrosive illness that
decays societies, but can be effectively ameliorated through norms and social capital. Smaug greed
is so toxic, so potent, that the state is the only entity powerful enough to put it in check. Greed,
particularly Smaug greed, must be put in check because the false scarcity it manufactures, and the
unsafe workplaces it creates, maim and kill people. The stealth violence of Smaug greed justifies
a tax to confiscate the hoards.
#GreedIsEvil. It's time to #SlayTheSmaugs
*One of the arguments against redistribution is that is against the sacrosanct efficient market,
which forbids making one person better off if the price is making someone else worse off. But money
has diminishing returns as money after a certain point; the purchasing power between someone
with one billion and ten billion dollars is negligible, though the difference between someone with
ten thousand and a hundred thousand, or a hundred thousand and a million is huge. After a certain
level of accumulation money is simply ego gratifying points, it's not money any more. Thus taking
it and using it as money isn't making someone 'worse off' in an economic sense. Also, when considering
whether someone is 'worse off', it's worth considering where their money comes from; how many people
did they leave 'worse off' as they
extracted the money? Brett ,
July 22, 2016 at 10:07 am
Thomas Hinds ,
July 22, 2016 at 10:33 am
After a certain level of accumulation money is simply ego gratifying points, it's not
money any more.
It quite literally isn't "money" as we regular folks know it beyond a certain point – it's
tied up in share value and other assets. Which of course raises the question – when you decide
to do your mass confiscation of wealth, who is going to be foolish enough to buy those assets
so you actually have liquid currency to spend on infrastructure as opposed to illiquid assets?
Or are you simply going to print money and spend it on them?
Ranger Rick ,
July 22, 2016 at 10:37 am
Wealth on this scale has nothing to do with financial security or luxurious living. For
the trivial, it is (as per D. Trump) a game and money is how you keep score. For the serious,
it has to do with power, with the ability to affect other people's lives without their consent.
That is why the Smaugs' wealth is absolutely our business. It should be understood that we're
talking about taking very large amounts of money and power away from very rich people, people
for whom money and power are pretty much the only things they value. It will not be pretty.
a different chris ,
July 22, 2016 at 11:52 am
People become rich and stay that way because of a market failure that allows them to accumulate
capital in the same way a constricted artery accumulates blood. What I'm wondering, continuing
this metaphor, is what happens when all that money is released back into the market at once via
a redistribution - toxic shock syndrome.
You can see what happens to markets in places where "virtual money" (capital) brushes up against
the real economy: the dysfunctional housing situation in Vancouver, London, New York, and San
It may be wiser to argue for wealth disintegration instead of redistribution.
John Merryman ,
July 22, 2016 at 12:55 pm
Yes I was thinking about that … money is just something the government prints to make the system
work smoothly. But that, and pretty much any view of money, obscures the problem with the insanely
If these people, instead of having huge bank accounts actually had huge armies the government
would move to disarm them. It wouldn't re-distribute the tanks and rifles. It would be obviously
removing a threat to everybody.
Now there would be the temptation to wave your hands and say you were "melting it into plowshares"
but that causes an accounting problem - that is, the problem being the use of accounting itself.
Destroying extreme wealth and paying for say roads is just two different things and making them
sound connected is where we keep getting bogged down. Not a full-on MMT'er yet but it really has
illuminated that fact.
And no, as usual l have no solutions.
July 22, 2016 at 11:00 am
The western assumption is that money is a commodity, from salt to gold, to bitcoin, we assume
it can be manufactured, but the underlaying reality is that it is a social contract and every
asset is presumably backed by debt.
Here is an interesting link which does make the point about the contractual basis of money in
a succinct fashion;
Since the modern commodity of money is backed by debt and largely public debt, there is enormous
pressure to create as much debt as possible.
For instance, the government doesn't really budget, it just writes up these enormous bills, attaches
enough goodies to get the votes and the president can only pass or veto it and with all the backing
and no other method, a veto is a weak protection.
To budget is to prioritize and spend according to ability. What they could do would be to break
these bills into all their various "line items," have every legislator assign a percentage value
to each one, put them back together in order of preference and then the president would draw the
It would balance the power and reduce the tendency to overspend, but it would blow up our financial
system, which if anyone notices, is based on the sanctity of government debt.
If instead of borrowing the excess money out of the system, to spend on whatever, if the government
threatened to tax it out, people would quickly find other ways to store value than as money in
the financial system.
Since most of us save for the same general reasons, from raising children to retirement, we
could invest in these as public commons, not try to save for our exact needs. This would serve
to strengthen communities and their environments, as everyone would be more dependent on those
around them, not just having a private bank account as their personal umbilical cord.
We treat money as both medium of exchange and store of value. As Rick points out above, a medium
is like blood in the body and it needs to be carefully regulated. Conversely, the store of value
in the body is fat and while many of us do carry an excess, storing it in the circulation system
is not wise. Clogged arteries, poor circulation and high blood pressure are analogous to a bloated
financial system, poor circulation and QE.
Money is not a commodity, but a contract.
July 22, 2016 at 11:05 am
Do you realize that this supposed billionaire wealth does not consist of actual US dollars
and that, if one were to liquidate such wealth (in order to redistribute it in "fair" equal-dollars)
that number might drastically change?
The main thing these people (and indeed your pension funds) are actually hoarding are financial
assets, and those, it turns out, are actually "scarce". Or, well, I don't know what else you would
call trillions of bonds netting a negative interest rate and an elevated P/E stock market in a
It's a bit of a pickle from a macro environment. You can't just force them to liquidate their
assets, or else the whole system would collapse. It also kind of escapes the point that someone
has to hold each asset. I would be excited to see what happens when you ask Bill Gates to liquidate
his financial assets (in order to distribute the cash). An interesting thought, for sure. And
one that would probably bring the market closer to reasonable valuations.
It is simply a wrong conclusion to say "Wealth is x, and if we distribute it, everyone would
get x divided by amount of recipients in dollar terms". Now if you wanted to redistribute Bill
Gates' stake in Microsoft in some "fair" way, you could certainly try but that's not really what
Either way you can't approach wealth policy from a macro perspective like this, because as
soon as you start designing macro-level policy to adjust (i.e. redistribute) this wealth, the
value of it will fluctuate very wildly in dollar terms and may well leave everyone less well off
in some weird feedback loop.
July 22, 2016 at 11:38 am
"The full power of the state must be used against" #extremegreed: Except, of course, "L'etat
Of course as a Bernie supporter, the writer knows that, knows that it is a long game to even
start to move any of the hoard out of Smaug's cave, that there are dwarves with glittering eyes
ready to take back and reduce to ownership and ornamentation the whole pile (maybe they might
'share" a little with the humans of Lake Town who suffered the Dragon's Fire but whose Hero drove
a mystical iron arrow through the weak place in Smaug's armor, all while Sauron and Saruman are
circling and plotting and growing hordes of genetically modified Orcs and Trolls and summoning
the demons from below…
The Elves seem to be OK with a "genteel sufficiency," their wealth being useful durable stuff
like mithril armor and those lovely houses and palaces up in the trees. Humans? Grabbers and takers,
in Tolkien's mythology. I would second that view - sure seems to me that almost any of us, given
a 1000-Bagger like Zuckerman or Jobs or that Gates creature fell into, or Russian or Israeli or
African or European oligarchs for that matter (pretty universal, and expected given Davos and
Bilderberg and Koch summits) the old insatiable lambic system that drives for pleasure-to-the-max
and helps our baser tribal drives and penchant for violence to manifest and "thrive" will have
its due. Like 600 foot motor yachts and private-jet escape pods and pinnacles islands with Dr.
No-style security provided by guns and accountants and lawyers and faux-legitimate political rulers
Lots of analysis of "the problem." Not so much in the way of apparent remedies, other than
maybe lots of bleeding, where the mopes will do most of it and if history is any guide, another
Smaug will go on around taking all the gold and jewels and other concentrated wealth back to another
pile, to sit on and not maybe even gloat over because the scales are just too large…
Still hoping for the emergence of an organizing principle that is more attractive that "take
whatever you can and cripple or kill anyone who objects…"
a different chris ,
July 22, 2016 at 11:59 am
"People who have more money than they hope to spend for the rest of their lives, no matter
how many of their remaining days are "rainy"; people who have more money to pass on than their
children need for a lifetime of financial security, college and retirement included; people
who have more money to pass on than their grandchildren need for a similarly secure life–these
people insist on extracting still more wealth from their workers, their clients, and taxpayers
for no purpose beyond vaingloriously hoarding it."
These are people who are obscenely wealthy as opposed to merely wealthy. The fastest way to
challenge their toxic power would be to help the latter group understand that their interests
are not aligned with the former. Most millionaires (as opposed to billionaires) will eventually
suffer when the last few drops of wealth remaining to the middle and working classes are extracted.
Their future prosperity depends on the continued existence of a viable, mass consumer economy.
The billionaires imagine (in my view falsely) that they will thrive in a neo-feudal future–
where they own everything and the vast majority of humanity exists only to serve their needs.
This is the future they are attempting to build with the new TPP/TISA/TTIP regime. If we fail
to prevent the imposition of this transnational regime there will only be three classes of humans
left: kleptocrats, their favored minions, and slaves. Most neoliberal professionals, who imagine
that they will be in that second group, are delusional. Did the pharaohs have any need for people
like Paul Krugman or Maureen Dowd?
July 22, 2016 at 12:36 pm
Yeah unfortunately they did. It wasn't just the pharaoh and peasants, there was a whole priestly
class just to keep the workers confused.
Now the individuals themselves weren't at all necessary, they have always been easily replaceable.
July 22, 2016 at 1:54 pm
Pharaohs didn't need a middle/professional class as large as the ones in most western democracies
today. But, we are going in the pharaonic direction.
The problem our polite, right wing professional classes face is that they are increasingly
too numerous for society's needs. Hence the creeping gig-i-fication of professional employment.
The wage stagnation in all but the most guild-ridden (medicine) professions.
It's so reminiscent of what happened to the industrial working class in the late 70s and 80s.
I still remember the "well-reasoned", literate arguments in magazine op-eds proclaiming how line
workers had become "excess" in the face of Asian competition and automation. How most just needed
to retrain, move to where the jobs are, tighten their belts, etc. It's identical now for lawyers,
radiologists, and many layers of the teaching professions. If I weren't part of that "professional"
class I'd find the Schadenfreude almost too delicious.
July 22, 2016 at 2:23 pm
If we fail to prevent the imposition of this transnational regime there will only be three
classes of humans left: kleptocrats, their favored minions, and slaves.
Sounds about right, but you are overlooking the fact that the largest class will be The Dead.
They will not need nearly so many of Us, and we will be thinned, trimmed, pruned, marooned, or
otherwise made to go away permanently (quietly, for preference, I assume, but any way will do).
Ergo, the violence of ineffectual health care, toxic environment, poisonous food, dangerous
working conditions and violence (for instance, guns and toxic chemicals) in our homes, schools,
streets, workplaces, cities and, well, everywhere are not only a feature, but a major part of
And I'm actually feeling rather optimistic today.
#SlayTheSmaugs Post author ,
July 22, 2016 at 3:30 pm
It has been extensively documented that the merely wealthy are very upset at the obscenely
If the author is truly focusing on a tax for obscene wealth I'd like to know a specific threshold.
Is it 1 Billion and up? annual limit how many times the median income before it kicks in?
July 22, 2016 at 5:32 pm
Well, I'm happy to have a discussion about at what threshold a confiscatory wealth tax should
kick in; it's the kind of conversation we have with estate taxes.
I'm thinking a one off wealth tax, followed by a prevention of the resurrection of the problem
with a sharply progressive income tax. Is $1 billion the right number for this initial reclamation?
maybe. It is about the very top few, not the merely wealthy.
Quantum Future ,
July 22, 2016 at 4:15 pm
$1 billion is a reasonable amount of assets for determining whether to confiscate a portion
of a person's wealth in taxes. Or perhaps we could base it on a percentage of GDP. The U.S. GDP
in 2015 was approximately $17.9 trillion. Anyone with $1.79 billion or more in assets would have
1% of 1% of the U.S. GDP (0.01%). That's a lot of wealth, and surely justifies a heavy tax.
July 22, 2016 at 12:07 pm
To your question Ulysses
'Professionals, who imagine that they will be in that second group, are delusional. Did the
pharaohs have any need of Paul Krugman'
Sure they did. Those were called Priests who told the people what the gods were thinking. And
since Pharoah's concluded themselves gods. The slaves revolt by working less. Anybody notice the
dropping production levels the last couple of years? Whipping the slaves didn't turn out well
for the Egyptians.
A more modern similarity of the US is Rome. Vassals have been going full retard for several
years now, traitors sell international competitors military secrets while the biggest merchants
buy off the Senate.
Ceasar becomes more a figurehead until one leads a coup which has not happened yet. Aquiring
more slaves begins to cost more than what the return in general to the society brings but the
Smaugs do not care about that until the barbarians begin to revolt (See Orlando for example, the
shooter former employee of DHS. Probably pissed some of his comrades were deserted by US in some
July 22, 2016 at 12:07 pm
My point was that the category of people in this priestly caste will likely be far, far smaller
than the millions of credentialed neoliberal professionals currently living large in the top 10%
of the developed world.
Interesting mental image– to see Paul Krugman chanting praises to the new Son of the Sun God
Sylvia Demarest ,
July 22, 2016 at 12:17 pm
Look, there's a simple way to #SlayTheSmaugs, and it's a confiscatory wealth tax coupled with
a sharply progressive income tax, as part of an overall restructuring of the political economy.
Simple, is of course, not easy; indeed my proposal is currently impossible. But like Bernie
I'm trying to change the terms of political debate, to normalize what would previously be dismissed
as too radical to be countenanced.
I don't think the looting professional class needs to be slain, in the #SlayTheSmaugs sense.
I think they can be brought to heel simply by enforcing laws and passing new ones that are already
within acceptable political debate, such as one that defines corruption as using public office
for private gain. I think norms matter to the looting professional class as well. Another re-norm-ilization
that needs to happen is remembering what a "profession" used to be…
July 22, 2016 at 10:02 pm
Friends and neighbors!! Most of this "wealth" is ephemeral, it is based on the "value of assets"
like stocks, bonds, real estate, et al. If all of this "wealth" gets liquidated at the same time,
values would collapse. These people are fabulously wealthy because of the incredible inflation
we have seen in the "assets" they hold.
Remember, during the Great Depression the "wealth" wasn't confiscated and redistributed, it
was destroyed because asset values collapsed and over 2000 banks failed wiping out customer accounts.
This also collapsed the money supply causing debt defaults, businesses failures, and worker laid
offs. No one had any money because there was none.
The US was on the gold standard limiting the creation of liquidity. President Roosevelt went
off the gold standard so that he could work to increase the money supply. It took a long time.
The result of the depression was decades of low debt, cheap housing, and hard working people who
remembered the hard times. The social mood gradually changed as their children, born in more prosperous
times, challenged the values of their parents.
July 22, 2016 at 12:21 pm
Even though the bulk of what the super rich hold is in paper assets, they still hold tons of
real economy assets. They've succeeded in buying enough prime and even merely good real estate
(like multiple townhouses in Upper West Side blocks and then creating one monster home behind
the facade) to create pricing pressure on ordinary renters and homeowners in the same cities,
bidding art through the roof, owning mega-yachts and private airplanes, and most important of
all, using the money directly to reshape society along their preferred lines, witness charter
July 22, 2016 at 12:58 pm
If you are going to fight against the "Greed is Good" mentality, you are going to have to address
the habits of the average middle class household. Just take a look at the over accumulation of
amenities and creature comforts. The desire to signal ones status/wealth through "stuff" is totally
out of control and completely divorced from means/income.
July 22, 2016 at 2:09 pm
Fair, and I do propose that:
"But we need more voices insisting #GreedIsEvil. We need to teach that basic message at home,
in school, and in houses of worship. We need to send the right signals in our social interactions.
We need to stop coveting stuff, and start buying with a purpose: Shopping locally, buying American,
buying green and clean, and buying less. We need to waste less, share more and build community.
We need to re-norm-alize greed as evil, make it shameful again. Then we will have redefined ourselves
as citizens, not consumers."
July 22, 2016 at 12:45 pm
Isn't there an idiom about cutting off the head of the snake? Once you deal with the strongest
opponents, it's easier to go after the others. Too big to fail is nothing short of feeding the
July 22, 2016 at 1:48 pm
There was a time not that long ago that I would have opposed a "confiscatory wealth tax". After
looking at what most of those in the .1% are doing with their wealth, and their contempt for the
average person, those days are long gone. Plus it's good economics.
The only question is what is "obscene wealth". Well like pornography, I think we know it when
we see it.
#SlayTheSmaugs Post author ,
July 22, 2016 at 3:34 pm
I am wondering about the distribution of all this concentrated wealth; how much of it is spread
around in the equities and bond markets?
And if that amount was redistributed to the general public how much of it would return to the
equities and bond market?
I'm thinking not very much which would have catastrophic effects on both markets, a complete
reordering. This would undoubtedly crush the borrowing ability of our Federal government, upset
the apple cart in other words. With less money invested in the equities market it would undoubtedly
return to a lower more realistic valuation; fortunes would be lost with no redistribution.
Oh the unintended consequences.
Quantum Future ,
July 22, 2016 at 4:34 pm
Fair to ask: How do we achieve a confiscatory wealth tax without catastrophic unintended consequences?
But that's a very different question than: should we confiscate the Smaug's wealth?
One mechanism might be to have a government entity created to receive the stocks, bonds and
financial instruments, and then liquidate them over time. E.g. Buffett has been giving stock to
foundations for them to sell for awhile now; same kind of thing could be done. But sure, let's
have the "How" conversation…
July 22, 2016 at 1:53 pm
If lobbying were outlawed at the Federal level the billionaires and multi millionaires would
need to invest in something else. That signal has a multiplier effect.so your right eboit enforcement
of mostly what is on the books already. A 'wall' doesnt have to be built for illegal immigrants
either. Fine a couple dozen up the wazoo and the signal gets passed the game is over.
But until a few people's daughters are kidnapped or killed like in other 3rd world countries,
it wont change. That is sad but reality is most people do not do anything until it effects them.
I started slightly ahead of the crowd in summer of 2007 but that is because a regional banker
told me as we liked discussing history to look at debt levels of 1928 and what happened next.
On top of that, we are the like the British empire circa 1933 so we get the downside of that as
Pain tends to be the catalyst of evolution that fully awakens prey to the predators.
July 22, 2016 at 2:16 pm
"As Sanders often reminds us. . ."
I am sorry, Sir Smaug slayer. The underlying theme of your lengthy disquisition is that Sanders
is the legitimate voice of the 99%, and his future complicity within the Democratic Party is thereby
ameliorated by his current proposals within it. This is the true meat of your discourse ranging
so far and wide – even with the suggestion early on that we the 99% need tutoring on the evils
Not so. That ship has sailed. Our Brexit is not yet upon us, but that it is coming, I have
no doubt. The only question is when. To paraphrase a Hannah Sell quote on such matters. . . for
decades working class people have had no representation in the halls of Congress. All of the politicians
. . . without exception, have stood in the interests of the 1% and the super-rich.
Bernie Sanders included. Hannah's remarks were more upbeat – she made an exception for Jeremy
Corbyn. Unfortunately, I can't do that. Bernie has folded. We need to acknowledge that.
July 22, 2016 at 2:18 pm
One of the arguments against redistribution is that is against the sacrosanct efficient
market, which forbids making one person better off if the price is making someone else worse
I think you mean downward redistribution here since upward redistribution seems to be rather
sacrosanct and definitely makes one person better off at the price of making many someones worse
off to make it happen.
July 22, 2016 at 6:25 pm
Confiscatory wealth tax is too blunt an instrument to rectify the root causes discussed in
this article, and you do not want a blunt impact to the effect of disincentivizing pursuit of
Further Centralization the populous' money will incite more corruption which is what allows
the have's to continue lording it over the have nots.
What are alternatives?
Instead Focus on minimizing corruption,
Then it will be possible to implement fair legislation that limits the options of the greed to
make decisions that results in unfair impacts on the lower class.
Increase incentives to share the wealth, (tax deductible charitable giving is an example).
We do need to encourage meritocracy whenever possible, corruption and oppression is the antithesis
We need to stop incentivizing utilization of debt, that puts the haves in control of the have
July 22, 2016 at 6:27 pm
"Financial success. " As long as those words go together, and make an object of desire, the
fundamental problem ain't going away.
Of course the underlying fundamental problem of human appetite for pleasure and power ain't
going away either. Even if a lot of wealth was taken back (NOT "confiscated") from the current
crop and hopeful horde of kleptocrats…
July 22, 2016 at 2:51 pm
How long before the adage "A fool and his money are soon parted" kicked in?
July 22, 2016 at 4:03 pm
"We do need to encourage meritocracy whenever possible, corruption and oppression is the antithesis
I disagree strongly with your premise that some sort of pure and natural meritocracy has
ever existed, or could ever exist in human society. Corrupt and oppressive people will always
define as "meritorious" those qualities that they themselves possess– whether wealth, "gentle
birth," "technical skills," or whatever. We all possess the same merit of being human.
An Egyptologist, with an Oxbridge degree and extensive publications has no merit– in any meaningful
sense– inside a frozen foods warehouse. Likewise, the world's best frozen foods warehouse worker
has little to offer, when addressing a conference focused on religious practices during the reign
of Ramses II. Meritocracy is a neoliberal myth, intended to obscure the existence of oligarchy.
July 22, 2016 at 6:44 pm
An Egyptologist, with an Oxbridge degree and extensive publications has no merit– in any
meaningful sense– inside a frozen foods warehouse. Likewise, the world's best frozen foods
warehouse worker has little to offer, when addressing a conference focused on religious practices
during the reign of Ramses II. Meritocracy is a neoliberal myth, intended to obscure the existence
I am confused.
You claim meritocracy is "a neoliberal myth, intended to obscure the existence of oligarchy",
but (seemingly) appeal to meritocratic principles to claim a warehouse worker doesnt offer much
to an academic conference. Can you clear up my misunderstanding?
I agree, btw, that Idealized meritocracy has never existed (nor can). Follow up question: There
has never been an ideal ethical human, does that mean we should stop encouraging ethical behavior?
Pierre Robespierre ,
July 22, 2016 at 4:37 pm
Meritocracy is not the same as recognizing greater and lesser degrees of competence in various
activities. It is absurd to deny that some are more skillful at some things than others. Assigning
the relative "merit" to various competencies is what I find objectionable.
Encouraging ethical behavior has nothing to do with ranking the "merit" levels of different
occupations. While some occupations are inherently unethical, like that of an assassin, most can
be performed in such a way as to do no harm to others, and some are nearly always beneficial to
society at large.
Someone who did nothing but drink whiskey all day, and tell funny stories in a bar, is far
more beneficial to society at large than a busy, diligent economist dreaming up ways to justify
the looting of the kleptocrats.
July 22, 2016 at 10:23 pm
Wealth Redistribution occurs when the peasants build a scaffold and frog march the aristocracy
up to a blade; when massive war wipes out a generation of aristocracy in gas filled trenches or
in the upcoming event.
July 22, 2016 at 11:00 pm
"Fair to ask: How do we achieve a confiscatory wealth tax without catastrophic unintended consequences?"
Answer: Do it and find out. Some things can only be determined empirically. First, do what
needs doing. We can take care of the Utility afterwards.≥
I would like to see a financial settlements tax like Scott Smith presidential candidate recommends.
"... Democrats: Please Renounce Mankiw's Myths ..."
"... Mankiw is a propagandist. ..."
"... The values and ideology represented in the Economics textbook Bill Black analyzed didn't arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of a narrow segment of our society who have accumulated enormous personal wealth through a variety of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics Chairs" in our public and private universities; economics "think tanks"; and speeches, books, consulting engagements, and board memberships for "prominent economists". ..."
"... Mankiw is a shill/useful idiot for his oligarchs patrons. #11 explains the idiocy of the previous 10. ..."
"... Did the banks which loaned billions to the gas frackers of North Dakota know that production would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned. ..."
"... Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly on the pockets in which the money lands. ..."
"... stocks, real estate, luxury goods, premium educations, etc. ..."
"... This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social unrest in the world today. They live in a completely different world. ..."
"... My first exposure to Mankiw's principles was actually an early version of the talk by Yoram Bauman in this video. It hits several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how Mankiw attempts to cloak his biases in supposedly neutral terms. ..."
"... I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient) ..."
"... My paper lists four principles claimed to be at the core of modern economics by Mankiw and then shows how all four principles are false: Amir-ud-Din, Rafi and Zaman, Asad, Failures of the 'Invisible Hand' (July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN: http://ssrn.com/abstract=2293940 or http://dx.doi.org/10.2139/ssrn.2293940 ..."
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate
professor of economics and law at the University of Missouri-Kansas City. Jointly published with
New Economic Perspectives
This is the second column in a series on the N. Gregory Mankiw's myths and dogmas that he spreads
in his economic textbooks. The first column exposed the two (contradictory) meta-myths that begin
his preface. This column de-mythologizes Mankiw's unprincipled "
principles " of economics – the ten commandments of theoclassical economics' priestly caste.
Some of these principles, correctly hedged, could be unobjectionable, but in each case Mankiw dogmatically
insists on pushing them to such extremes that they become Mankiw myths.
To understand Mankiw's mythical 10 commandments, one must understand "Mankiw morality" – a morality
that remains hidden in each of his textbooks. Few people understand how radically theoclassical economics
has moved in the last thirty years. Milton Friedman famously argued that CEOs should operate exclusively
in the interest of shareholders. Mankiw, however, is a strong supporter of the view that CEOs will
not only defraud customers, but also shareholders and creditors by looting the firm. "[I]t would
be irrational for savings and loans [CEOs] not to loot." "Mankiw morality" decrees that if you have
an incentive as CEO to loot, and fail to do so, you are not moral – you are insane. Mankiw morality
was born in Mankiw's response as discussant to George Akerlof and Paul Romer's famous 1993 article
"Looting: The Economic Underworld of Bankruptcy for Profit."
Mankiw's textbooks preach the wonders of the indefensible a system he has helped design to allow
elite CEOs to loot the shareholders with impunity – the antithesis of Friedman's stated goal. Mankiw
morality helps create the "criminogenic environments" that produce the epidemics of "control fraud"
that drive our recurrent, intensifying financial crises. It is essential to interpret Mankiw's ten
myths in light of his unacknowledged immoral views about how CEOs will and should respond to incentives
to rig the system against the firm's consumers, employees, creditors, and shareholders. His textbooks
religiously avoid any disclosure of Mankiw morality or its implications for perverting his ten commandments
into an unethical and criminogenic dogma that optimizes the design of a criminogenic environment.
- People Face Tradeoffs. To get one thing, you have to give up something else.
Making decisions requires trading off one goal against another.
This can be true, but Mankiw pushes his principle to the point that it becomes a myth. Life
is filled with positive synergies and externalities. If you study logic or white-collar criminology
you will make yourself a far better economist. You may trade off hours of study, but not "goals."
If your "goal" is to become a great economist you will not be "trading off one goal against another"
if you become a multidisciplinary scholar – you will strongly advance your goal. If you study
diverse research methods you will be a far better economist than if you study only econometrics.
- The Cost of Something is What You Give Up to Get It. Decision-makers have
to consider both the obvious and implicit costs of their actions.
"Opportunity costs" are an important and useful economic concept, but Mankiw's definition sneaks
ideological baggage into both sentences that turns his principle into multiple myths. Mankiw implicitly
assumes fraud and other forms of theft out of existence in the first sentence. "Cost" is often
not measured in economics by "what you give up to get it." If your inherit a home that lacks fire
insurance and immediately burns down there is a cost to you (and society) even though you gave
up nothing to inherit the home. If the CEO loots "his" firm he gave up nothing to get the millions,
but if he loses those millions he will consider it to have a "cost." Theoclassical economists
have a primitive tribal taboo against even using the "f" word (fraud).
Decision-makers frequently ignore the "costs of their actions." There is nothing in economic
theory or experience that supports the claim that the "decision-makers" "have" to consider costs.
It is rare that decision-makers must do – or not do – anything.
It is likely that Mankiw means that optimization requires decision-makers to "consider" all
"costs of their actions," but that too is a myth. Theoclassical optimization requires perfect,
cost-free information, pure "rationality," and no externalities. None of these conditions exist.
Car buyers have no means of knowing the costs of buying a particular car. If they bought a GM
car the ignition mechanism defect could cause the driver to lose the ability to control the car
– turning it into an unguided missile hurtling down (or off) a highway at 70 mph. The car buyer
does not know of the defect, does not know who will be driving when the defect becomes manifest,
does not know who the passengers will be, and does not know who and what else could be injured
or damaged as a result of the defect. The theoclassical view is that the buyer who "considers"
the costs of buying his defective car to others (negative externalities) and pays more money to
buy a car that minimizes those negative externalities is not acting ethically, but irrationally.
It is typically cheaper (for the producer, not society) to produce goods of inferior (but difficult
to observe) quality. The inability of the consumer to "consider" even the true costs to the consumer
and the consumer's loved ones of these hidden defects means that economists began warning 46 years
ago that "market forces" could become criminogenic. George Akerlof's 1970 article on markets for
"lemons" even coined the term "Gresham's" dynamic to describe the process. A Gresham's dynamic
is a leading form of a criminogenic environment.
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty,
therefore, lies not only in the amount by which the purchaser is cheated; the cost also must
include the loss incurred from driving legitimate business out of existence.
Akerlof was made a Nobel laureate in economics in 2001 for this body of work. Economics is
the only field in which someone would write a textbook ignoring a Nobel laureate whose work has
proven unusually accurate on such a critical point. There is only one reason to exclude this reality
from Mankiw's myths – Akerlof's work falsifies Mankiw's myths, so Akerlof's work disappears from
Mankiw's principles, as does the entire concept of fraud.
- Rational People Think at the Margin . A rational decision-maker takes action
if and only if the marginal benefit of the action exceeds the marginal cost.
The mythical nature of this principle flows from the multiple errors I have described. Mankiw
is being deliberately disingenuous. Theoclassical economics does not claim, for example, that
a firm produces a product "only if the marginal benefit of the action exceeds the marginal cost."
Theoclassical economists claim that a firm sells a product "only if the marginal benefit of the
action to the seller exceeds the marginal cost to the seller." The seller ignores social costs
For the sake of brevity, I will summarize that Mankiw's third principle is a myth for five
reasons known to every economist. First, it implicitly assumes out of existence positive and negative
externalities, which means that supposedly rational, self-interested decision-makers he postulates,
even if they had perfect, cost-free information, would not contract to maximize social welfare.
Second, as Mankiw morality implicitly admits, the actual optimization principle under theoclassical
economics would be determined by the marginal benefits and costs of an action to the decision-maker
– the CEO – not the firm, and certainly not society. Theoclassical economists, however, refuse
to admit that explicitly, so it disappears from Mankiw's 10 commandments.
Third, the information provided by CEOs is often not simply incomplete and costly, but deliberately
deceptive. Where information is merely incomplete, consumers may pay far more for a product than
they will benefit from the purchase. Where the seller provides deceptive information about quality,
the buyer and members of the public may be harmed or even killed. The CEO may also be looting
"his" firm as well as the customers. Mankiw has implicitly assumed perfect, cost-free information
and implicitly assumed that fraud does not exist.
Fourth, conflating rationality with optimization of personal costs and benefits is wrong on
multiple grounds. It defines ethical behavior as "irrational" where the consumer or CEO takes
into account social costs and benefits and protects the interests of others in an altruistic manner.
Everything we know from behavioral economics also makes clear that humans are not "rational" in
the manner predicted by theoclassical economics. Mankiw has implicitly assumed out of existence
thirty years of economic research on how people actually behave and make decisions.
Fifth, firms with monopoly power, according to theoclassical economics, maximize their profits
by deliberately reducing production to a point that the social cost of producing the marginal
unit is less than the marginal benefit to the consumer. Mankiw has implicitly assumed away monopolies.
- People Respond to Incentives. Behavior changes when costs or benefits change.
I have responded to this myth in a
prior article . The implications of his fourth principle in conjunction with Mankiw morality
are devastating for theoclassical economics. CEOs create the incentives and understand how "behavior
changes" among their agents, employees, and subordinate officers in response to those incentives.
Under theoclassical principles this will unambiguously lead "rational" CEOs to set incentives
to rig the system in favor of the CEO. Because fraud and abuse creates a "sure thing" that is
certain to enrich the CEO, Mankiw's fourth commandment predicts that control frauds led by CEOs
will be ubiquitous. Fortunately, many CEOs are ethical and remain ethical unless they are subjected
to a severe Gresham's dynamic. As a result, Mankiw's commandments over-predict the incidence of
fraud and abuse by CEOs. Similarly, experiments demonstrate that humans frequently act in altruistic
manners despite financial incentives to act unfairly.
- Trade Can Make Everyone Better Off .
Trade allows each person to specialize in the activities he or she does best. By trading with
others, people can buy a greater variety of goods or services.
article on faux "trade deals" that exposes this myth.
- Markets Are Usually a Good Way to Organize Economic Activity .
Households and firms that interact in market economies act as if they are guided by an "invisible
hand" that leads the market to allocate resources efficiently. The opposite of this is economic
activity that is organized by a central planner within the government.
Again, the key interaction under theoclassical theory is between CEO and consumers, employees,
creditors, shareholders, and the general public. "Markets" are vague constructs and they work
best when ethical and legal provisions reduce fraud to minor levels. When these ethical and legal
institutions are not extremely effective against fraud, the incentives created by the market can
be so perverse that they create a criminogenic environment that produces epidemic levels of fraud.
Mankiw's myth is to describe only one possible incentive and treat it as the sole possibility
other than what he falsely describes as "the opposite" – a government planner. The opposite incentive
to the so-called "invisible hand" is the Gresham's dynamic. Mankiw mythically presents the government
as the threat to an effective economy rather than an institution that is essential to producing
and enforcing the rule of law that prevents a Gresham's dynamic.
- Governments Can Sometimes Improve Market Outcomes .
When a market fails to allocate resources efficiently, the government can change the outcome through
public policy. Examples are regulations against monopolies and pollution.
The myth here is that government only has a desirable role where there is a "market fail[ure]."
Mankiw treats "markets" as the norm and implicitly assumes that the government normally has nothing
to do with making markets succeed. Even conservative classical economists admitted that the rule
of law was essential to an effective economy and required an effective government. Well-functioning
governments always improve "market outcomes." Indeed, they are typically essential to making possible
Mankiw also fails to explain that "markets" will be fictional and massively distort resource
allocation (that is what a hyper-inflated bubble does) when there is an epidemic of control fraud.
As I have explained, Mankiw's own principles predict (indeed, over-predict) that deregulated "markets"
will frequently prove so criminogenic that they will produce epidemics of control fraud.
- A Country's Standard of Living Depends on Its Ability to Produce Goods and Services.
Countries whose workers produce a large quantity of goods and services per unit of time
enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average
First, the CEOs of sectors such as finance that are immensely unproductive – so unproductive
that they cause enormous losses rather than growth, and receive exceptional income because they
loot. Income is often based not on productivity, but on the CEOs' wealth and economic and political
power that allows them to rig the economy. A nation's standard of living also depends on its employment
levels, which can be crushed by economic policies such as austerity.
The issue is not what happens to "average income," but what happens to median income, wealth,
the income and wealth of the lowest quartile or particular minorities, and to income and wealth
inequality. A nation can have high average productivity, yet have poor performance for decades
in these other critical measures.
Consider what has happened to the folks who tried to do everything right to boost their productivity
according to the theoclassical economic "experts'" advice. This is what has happened to Latino
and black households where a head of the household has at least a college degree. The source is
economists at the extremely conservative
St. Louis Fed .
Hispanic and black families headed by someone with a four-year college degree, on the other
hand, typically fared significantly worse than Hispanic and black families without college
degrees. This was true both during the recent turbulent period (2007-2013) as well as during
a two-decade span ending in 2013 (the most recent data available).
White and Asian college-headed families generally fared much better than their less-educated
counterparts. The typical Hispanic and black college-headed family, on the other hand, lost
much more wealth than its less-educated counterpart. Median wealth declined by about 72 percent
among Hispanic college-grad families versus a decline of only 41 percent among Hispanic families
without a college degree. Among blacks, the declines were 60 percent versus 37 percent.
One of the reasons that college-educated Latino and black families lost so much wealth compared
to their white and Asian-American counterparts is that they were more likely to get their degrees
from the for-profit colleges that theoclassical economists touted – colleges that frequently provided
a very expensive and very poor education, often involving defrauding the students. Another reason
that college-educated Latino and black families lost so much wealth compared to their white and
Asian-American counterparts is that they were far more likely to be the victims of predatory home
lending – an activity for which theoclassical economists served as the primary apologists.
Mankiw also ignores critical factors that determine "a country's standard of living." Yes,
China reports higher growth, but it is also operating in an unsustainable fashion that has destroyed
much of its environment and threatens to be a major contributor to the global suicide strategy
of causing severe climate change.
- Prices Rise When the Government Prints Too Much Money . When a government
creates large quantities of the nation's money, the value of the money falls. As a result, prices
increase, requiring more of the same money to buy goods and services.
No, and Mankiw knew this was a myth when he wrote it. First, "prices rise" for many reasons.
Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage others
to do so in order to increase prices on existing drugs by hundreds, sometimes thousands of percent.
Prices rise because accounting control fraud recipes hyper-inflated the largest bubble in history
in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels cause oil
shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.
Inflation has not risen, indeed general price levels have often fallen (deflation) despite
record creation of money by central banks and private banks. Theoclassical economists have regularly
predicted hyper-inflation. As Paul Krugman emphasizes, virtually none of them even admits their
serial prediction failures.
- Society Faces a Short-Run Tradeoff Between Inflation and Unemployment . Reducing
inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding
the short-run effects of changes in taxes, government spending and monetary policy.
Mankiw ends his ten myths with a series of myths. Foolish, counterproductive austerity often
causes inflation to fall to harmfully low – even negative (deflation) – levels that can lead to
prolonged recessions that cause severe damage to people and economies. Stimulus provides a win-win
that improves economic growth and reduces human suffering without causing harmful inflation.
A nation is able to operate at extremely high levels of employment without producing harmful
inflation. Mankiw is a partisan Republican. When Republican presidents in the modern era are faced
with recessions they junk their theoclassical dogmas and adopt stimulus programs, though they
generally do so largely through the economically inefficient and less effective means of slashing
tax rates for the wealthy.
Democrats: Please Renounce Mankiw's Myths
Unlike the Republicans, who always rise above their theoclassical principles when their president
is in office and faces a recession, the "New Democrats" are the ones who seem to have drunk the theoclassical
Kool-Aid and strive endlessly to create the self-inflicted wound of austerity when they are in power.
New Democrats also love to bash Republican presidents for running deficits even when those deficits
produced no harmful inflation and helped produce recovery. It is sensible and honest to point out
that tax cuts for the wealthy are a far less effective form of stimulus and to present and support
superior alternatives such as job guarantee and infrastructure programs. It would be superb if Democrats
were to point out that by far the most effective, prompt means of cutting taxes to stimulate the
economy in response to a recession is to cease collecting the Social Security taxes for several years.
It is not fine to praise Bill Clinton for taking the harmful step of running a budget surplus or
to bash Republicans because they – correctly – increased fiscal stimulus (and therefore the short-term
deficit) in response to a recession.
Democrats also need to stop spreading the myth that Bill Clinton was an economic marvel. He was
the luckiest president in history in terms of timing. His economic "success" was the product of two
of the largest bubbles in history (the dot.com and real estate bubbles). The real estate bubble is
the only thing that prevented his dot.com bubble from causing an economic collapse during his term.
The real estate bubble was so enormous that it made it easy for the fraudulent CEOs to "roll" (refinance)
the fraudulent loans they made, which helped cause the bubble to hyper-inflate. The saying in the
trade is "a rolling loan gathers no loss." This meant that the bubble was Bill Clinton and George
Bush's bubble, but it collapsed on George Bush's watch so Clinton gets the credit for the high employment
produced by the twin bubbles and Bush gets the blame for the massive unemployment that a massive
bubble will create when it collapses (if it is not replaced by an even larger bubble).
Selected Skeptical Comments
May 17, 2016 at 1:10pm
May 17, 2016 at 11:2am
The pots are calling the kettles black; standard politics, redundancy easily replaced by automation.
You do know that Bernie isn't going after Hillary because he has his skeletons, especially
in the medical university complex, don't you. Ever live in Vermont. You did notice that Hillary
just threatened him, to the core of his argument.
Left in Wisconsin ,
May 17, 2016 at 11:5am
Ke – Very insightful!
This… "Energy is information, most of which humans ignore."…and this… "Public Education policies
are disgusting to anyone who really wants to learn…" are the important elements although I would
add that humans don't ignore so much as don't know/are not taught, and I would say Public education
has been purposefully corroded to the point of disgusting.
Jim Haygood ,
May 17, 2016 at 12:14pm
Democrats: Please Renounce Mankiw's Myths
May 17, 2016 at 6:35pm
"Prices rise" for many reasons.
Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage
others to do so in order to increase prices on existing drugs by hundreds, sometimes thousands
of percent. Prices rise because accounting control fraud recipes hyper-inflated the largest bubble
in history in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels
cause oil shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.
- Bill Black
All of these examples treat relative price rises in the affected sector, not the general
inflation which saw the U.S. CPI increase by a factor of ten (10) since 1950. Hedge funds and
cartels couldn't do that, no matter how successful they were in increasing their share of the
The same logic is used by union busters to claim that "greedy labor unions" cause inflation
- an equally false notion. Labor can increase its share of national income at the expense of corporate
profit, but it cannot cause a general inflation.
This unprecedented secular inflation did, however, coincide with government bonds surpassing
gold as the Federal Reserve's largest holding in 1945, and with the dollar's gold link being severed
Bill Black evidently hews to the scholarly tradition of the eminent Argentine economist and
former central banker Mercedes Marcó del Pont:
"It is totally false to say that the printing more money generates inflation; price increases
are generated by other phenomena like supply and external sector's behaviour," said Marcó del
This from a country that lopped thirteen (13) zeros off its currency in the past century.
*takes another bong hit and blows a fat smoke ring*
May 21, 2016 at 8:0am
I would argue that the real estate bubble caused genuine inflation because it was a credit
bubble, but I agree on your other points. Intuitively I think of inflation as a rise in prices
without a corresponding rise in (average) affordability. It's why a Big Mac today can cost multiple
times what it did 30 years ago without being any less affordable for the average customer.
Mankiw's definition isn't precisely wrong but it's oversimplified. He doesn't address the role
of banks in money creation, he doesn't define money (what about credit?) he doesn't discuss the
factors that might cause government to print more or less money, and he doesn't say how much is
too much. Without more rigor than he provides, it's only useful as a plausibility argument after
Regarding Black's comment:
Inflation has not risen, indeed general price levels have often fallen (deflation) despite
record creation of money by central banks and private banks.
I would say this was because they were doing it during the deflation of a credit bubble on
a large enough scale that money creation by the government was a drop in the bucket by comparison,
and that was what caused deflation. Which again points to the importance of defining terms and
operating constraints (why couldn't the government print money on a massive scale to compensate?
What are the drawbacks and limitations on that approach?)
Economists do love to make doomsday hyperinflation predictions that never seem to pan out.
As far as I can tell, that's because they think that the economy is inherently unstable and will
lapse naturally into massive inflation (see: wage-price spiral) or some other disastrous state
without the wise guiding hand of a central banker to prevent it. There seems to be very little
evidence of this actually happening in reality, and the few genuine examples of hyperinflation
(Weimar, Zimbabwe) have typically resulted from a collapse in production coupled with debts denominated
in other currencies that (a) considerably exceed the country's ability to pay and (b) require
the attempt to be made anyway.
May 17, 2016 at 12:59pm
Notice that Mankiw managed to say nothing about "Economic instability or deflation, and eventually
economic depression, is caused when the government prints TOO LITTLE money", which is actually
true and happens quite reliably.
Mankiw is a propagandist.
May 18, 2016 at 12:3am
The true laws of economics:
- If it is physically impossible for something to occur, it won't, and finance be damned.
Economics is first and foremost a branch of the physical sciences, though most economists have
- Supply and demand.
- Unintended consequences.
- High productivity does not create high wages. High wages create high productivity. If you
spend a lot of money on water-conservation technology at the base of Niagara Falls, will it
increase the economic value of water there?
- The physical utility of a commodity (including labor) is not related to its economic value.
Adam Smith did get something right.
- Nothing in this universe can grow exponentially for very long. Societies with sustained
high fertility rates will always be miserably poor, and only societies that have first reduced
their fertility rate can hope to become rich.
- A (more-or-less) free market is indeed a powerful and essential optimization mechanism
("the invisible hand") but it is nonlinear. Like all such nonlinear optimization mechanisms,
it can and does get stuck in local minima and require external directed efforts to move to
a more optimal solution. This is basic math.
- Inflation occurs when prices go up. That's it.
- "Capitalism" guarantees neither poverty nor prosperity. The market is neutral. Even as
the laws of physics are obeyed equally well by a building that stands tall as by one that collapses
into a heap of rubble, the laws of the market are also obeyed in miserably poor Bangladesh
as well as in prosperous Switzerland. With 100 desperate people competing for every job, wages
for the many will be low and profits for the few will be high. And vice versa. Blaming "capitalism"
for poverty is silly, as if I threw someone off a cliff and then blamed the law of gravity
for their death. Trying to deny market forces is equally silly, like trying to legislate gravity
out of existence. It simply must be worked with.
- "Free to choose to own or employ slaves", "Free trade includes the ability of big corporations
to restrict trade to maximize their profits", "Free to buy politicians and have them loot the
public treasury in your interest" … Strict libertarianism is logically incoherent and ethically
Chauncey Gardiner ,
May 17, 2016 at 1:12pm
I quibble with 6 & 8. "A more or less free market" is a well regulated market. How much "more
free" or "less free" a market needs to be to best distribute its product depends entirely on its
particular conditions and vagaries. The insinuation that a market should be "stuck in a local
minima" before oversight can improve its performance echoes Mankiw's 7th misconstruction, that
(in Bill Black's words) "government only has a desirable role when there is a market failure."
I especially disagree that markets are neutral. Markets exist at the pleasure of the Capitalists
who create and smother them for profit. Capitalists are forever cajoling "market opportunities"
out from under every rock they can turn over. They invent, shape, split, combine, dissect, analyze,
produce, reproduce, abandon, corner and strangle markets in pursuit of lucre. There is no market
for Ford electric cars in California beyond the handful required by statute, despite ample demand,
because individuals at Ford have determined that creating that particular market will eat into
the personal profit they might extract from other markets. "Efficient" markets, that only return
a gazilionth of a point on investment because of optimal competition, cease to be because the
margin is too low to justify the hassle or the capital risk. Switching gears, labor markets in
Bangladesh & Switzerland exist when Capitalists decide to hire workers. Hirees agree to be paid
what Capitalists choose to pay, whether "freely" or under the duress of the State.
There is no market equivalent to gravity or the law of planetary motion. The model of supply
and demand is a hypothetical post rationalization of a shifting negotiation – while it's helpful
to a degree, supply/demand doesn't make "lawfull" (or useful) predictions until demand nears infinity
(see health care: "how much will that be, doc?" – "how much have you got?", or housing: "how much
can you borrow from a fractional reserve player who lends without risk and won't verify your income?")
As the local monopolists of violence, States can engage markets as they see fit. They can supply
(Volkswagon & the post office), demand (food stamps, R&D grants), regulate, open (ACA) or close
them (pharmaceutical imports) to their hearts desire. Good or bad outcomes depend entirely on
the wisdom of the policy.
Whoa. Exhale. To be sure, I inhaled. Too many words when I should just say:
Its good we agree that policy should be just and compassionate.
May 17, 2016 at 1:16pm
The values and ideology represented in the Economics textbook Bill Black analyzed didn't
arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of
a narrow segment of our society who have accumulated enormous personal wealth through a variety
of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics
Chairs" in our public and private universities; economics "think tanks"; and speeches, books,
consulting engagements, and board memberships for "prominent economists".
This matter is really about whose values will control government economic policy and law.
Excellent analysis. Thank you, Bill Black, for all you do and have done.
May 17, 2016 at 2:45pm
Mankiw is a shill/useful idiot for his oligarchs patrons. #11 explains the idiocy of the
Mike Thorne ,
May 17, 2016 at 4:01pm
I see much of the underlying theory of classical economics as simplifications that make the
math easier. One of my favorite examples of misallocation of resources was the market for Burbank
Russet potatoes in 2001. Basically, producers wanted $6.50 per hundredweight for spuds. The big
buyer, Simplot offered farmers $4.50 pre-season. Many farmers decided to wait until harvest, hoping
the spot market would give them a better price. I should also mention that in Idaho, farmers not
wishing to plant in a given year, could sell their water to other farmers, or to the federal government
which uses the water to help salmon and to produce hydropower. Thus, producing potatoes carried
the opportunity cost of water leasing. But leasing water leasing to the federal government is
culturally taboo in the ag. community. 2001 was a dry year and most of the ag. water was consumed
The outcome was a banner year in production, driving the spot market price to $0.50 per hundredweight,
far less than the cost of production. Many acres of potatoes were plowed under – a total loss
– to everyone.
My point is – there is no way to know, in advance, what the price of a commodity will be in
the future unless you know, or can limit, the rate of production and control demand.
Did the banks which loaned billions to the gas frackers of North Dakota know that production
would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would
more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned.
I suppose I am a bit defensive of classical microeconomics because it is elegant. But I am
also terribly suspicious of its answers because one never has either the information or the control
to be anywhere near as certain as the calculus would suggest.
Jeff Z ,
May 17, 2016 at 6:24pm
On point #9: "Prices Rise When the Government Prints Too Much Money". Recent inflation data
suggests it's a myth. But if restated as "When government prints money, prices rise on the goods
and services that the people who receive the money tend to buy", then it's NOT a myth.
That was the whole problem with the Federal Reserve's damned QE efforts. They printed gobs
of money, and it all landed in the pockets of the wealthy. The stuff they buy (stocks, real estate,
luxury goods, premium educations, etc.) has seen prices rise MUCH faster than nominal inflation.
And the people who didn't get any of the newly printed money (i.e., most of us)… Well, these sad
folks couldn't afford to spend any more than before, so anybody who attempted to impose prices
hikes on low-end consumer goods saw a loss of sales volume.
Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly
on the pockets in which the money lands.
May 17, 2016 at 6:32pm
Mike Thorne ,
May 18, 2016 at 8:2am
stocks, real estate, luxury goods, premium educations, etc.
But it's hard to produce more of those, so with an increase in money chasing them their prices
will rise. If the government handed money to poor people, they would buy food, clothes, cars,
televisions, etc. In other words, things that society can produce more of. That's my read, anyway.
May 17, 2016 at 5:07pm
Partially. Prices for good where quantities are truly fixed (like acres of land in San Francisco)
can rise sharply when extra money pours in.
But even when there is opportunity to increase production, manufacturers must purchase equipment
(like farm equipment for more food) or hire more workers (thereby tightening the labor market
and pushing wages up). These result in price hikes. More modest price hikes than San Francisco
real estate, but still real hikes. It's the classic supply vs. demand curve from classic microeconomics.
That said, "QE to the people" is certainly less objectionable than the "QE to the bankers and
the 1%" that we've seen over the past five years. Prices would go up, but people would get to
buy more things they want or need, and hiring would likely go up as well. [And at a minimum, there
needs to be at least *some* growth in the money supply to keep up with population growth. Otherwise
we see deflation and the ability to become wealthier by hoarding cash.]
May 17, 2016 at 6:33pm
This was Mankiw's "response" to OWS back in 2011:
"Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes
at the top of the income distribution have fallen substantially over the past few years.
"According to the most recent IRS data, between 2007 and 2009, the 99th percentile income
(AGI, not inflation-adjusted) fell from $410,096 to $343,927. The 99.9th percentile income
fell from $2,155,365 to $1,432,890. During the same period, median income fell from $32,879
This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters
like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social
unrest in the world today. They live in a completely different world.
May 18, 2016 at 2:3am
And since then, nearly every penny of income gains has gone to the 1%.
May 18, 2016 at 8:5am
The big difference being that $70k to the 99th percentile means the difference between a new
Beemer this year or next while $500 for the median family means choosing which child goes hungry
for the second half of December.
And of course, Anonymous's excellent point. You are cherry picking old data based on a stock
market and real estate bubble crash. Median income families don't "own" real estate and certainly
don't own stocks.
Mankiw is either psychotic or was gleefully obfuscating when he presenting that out-dated analysis.
I say Kill the Rich and feed their bodies to the poor. It's not a solution at all (and I am
rich myself) but it would be deeply, deeply satisfying!
Erwin Gordon ,
May 18, 2016 at 10:2am
My first exposure to Mankiw's principles was actually an early version of the talk by Yoram
Bauman in this video. It hits
several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how
Mankiw attempts to cloak his biases in supposedly neutral terms.
Nontraditional Student ,
May 19, 2016 at 6:2am
As for number 6, I couldn't disagree with you more. Organisational power is dependent on it
being enforced BY THE GOVERNMENT. Without that coercion, individuals would find other solutions
for the want provided for by that particular organisation. I would suggest that you look at the
history of Pennsylvania circa 1681-1690 or Moresnet (in what is now Aachen) circa 1816 until the
end of WWI to understand what is possible when the free market really operates.
May 19, 2016 at 8:2am
I am actually a returning undergrad student and starting an econ course next week. I just
looked at the text book… and its Mankiw. Should be a fun semester.
May 20, 2016 at 5:19pm
Don't argue with the PR. You need to be strategic. Regurgitate the BS but be sure to read enough
corrective material that the toxins don't infect your brain.
Asad Zaman ,
July 13, 2016 at 10:1am
I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests
is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient)
My paper lists four principles claimed to be at the core of modern economics by Mankiw
and then shows how all four principles are false: Amir-ud-Din, Rafi and Zaman, Asad,
Failures of the 'Invisible Hand'
(July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN:
"... Real income stagnation over a far longer period than any since the second world war is a fundamental political fact. But it cannot be the only driver of discontent. For many of those in the middle of the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning. ..."
"... First, understand that we depend on one another for our prosperity. It is essential to balance assertions of sovereignty with the requirements of global co-operation. ..."
"... Second, reform capitalism. The role of finance is excessive. The stability of the financial system has improved. But it remains riddled with perverse incentives. The interests of shareholders are given excessive weight over those of other stakeholders in corporations. ..."
"... Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures are combining to shake the balance between democratic legitimacy and global order. The candidacy of Mr Trump is a result. ..."
July 19, 2016 | ft.com
Real income stagnation over a longer period than any since the war is a fundamental political
For every complex problem, there is an answer that is
clear, simple and wrong." HL Mencken could have been thinking of today's politics. The western
world undoubtedly confronts complex problems, notably, the dissatisfaction of so many citizens. Equally,
aspirants to power, such as Donald Trump in the US and Marine Le Pen in France, offer clear, simple
and wrong solutions - notably, nationalism, nativism and protectionism.
The remedies they offer are bogus. But the illnesses are real. If governing elites continue to
fail to offer convincing cures, they might soon be swept away and, with them, the effort to marry
democratic self-government with an open and co-operative world order.
What is the explanation for this backlash? A large part of the answer must be economic. Rising
prosperity is a good in itself.
But it also creates the possibility of positive-sum politics. This underpins democracy because
it is then feasible for everybody to become better off at the same time. Rising prosperity reconciles
people to economic and social disruption. Its absence foments rage.
McKinsey Global Institute sheds powerful light on what has been happening in a report entitled,
tellingly, Poorer than their Parents?, which demonstrates how many households have been suffering
from stagnant or falling real incomes. On average between 65 and 70 per cent of households in 25
high-income economies experienced this between 2005 and 2014. In the period between 1993 and 2005,
however, only 2 per cent of households suffered stagnant or declining real incomes. This applies
to market income. Because of fiscal redistribution, the proportion suffering from stagnant real disposable
incomes was between 20 and 25 per cent. (See charts.)
McKinsey has examined personal satisfaction through a survey of 6,000 French, British and Americans.
The consultants found that satisfaction depended more on whether people were advancing relative to
others like them in the past than whether they were improving relative to those better off than themselves
today. Thus people preferred becoming better off, even if they were not catching up with contemporaries
better off still. Stagnant incomes bother people more than rising inequality.
The main explanation for the prolonged stagnation in real incomes is the financial crises and
subsequent weak recovery. These experiences have destroyed popular confidence in the competence and
probity of business, administrative and political elites. But other shifts have also been adverse.
Among these are ageing (particularly important in Italy) and declining shares of wages in national
income (particularly important in the US, UK and Netherlands).
Real income stagnation over a far longer period than any since the second world war is a fundamental
political fact. But it cannot be the only driver of discontent. For many of those in the middle of
the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation
made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy
countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning.
So what is to be done? If Mr Trump were to become president of the US,
it might already be too late. But suppose that this does not happen or, if it does, that the
result is not as dire as I fear. What then might be done?
- First, understand that we depend on one another for our prosperity. It is essential to
balance assertions of sovereignty with the requirements of global co-operation. Global governance,
while essential, must be oriented towards doing things countries cannot do for themselves. It
must focus on providing the
essential global public goods. Today this means climate change is a higher priority than further
opening of world trade or capital flows.
- Second, reform capitalism. The role of finance is excessive. The stability of the financial
system has improved. But it remains riddled with perverse incentives. The interests of shareholders
are given excessive weight over those of other stakeholders in corporations.
- Third, focus international co-operation where it will help governments achieve significant
Perhaps the most important is taxation. Wealth owners, who depend on the security created
by legitimate democracies, should not escape taxation.
- Fourth, accelerate economic growth and improve opportunities. Part of the answer is stronger
support for aggregate demand, particularly in the eurozone. But it is also essential to promote
investment and innovation.
It may be impossible to transform economic prospects. But higher minimum wages and generous
tax credits for working people are effective tools for raising incomes at the bottom of the distribution.
- Fifth, fight the quacks. It is impossible to resist pressure to control flows of unskilled
workers into advanced economies. But this will not transform wages. Equally, protection against
imports is costly and will also fail to raise the share of manufacturing in employment significantly.
True, that share is far higher in Germany than in the US or UK. But Germany runs a huge trade
surplus and has a strong comparative advantage in manufacturing. This is not a generalisable state
of affairs. (See chart.)
Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures
are combining to shake the balance between democratic legitimacy and global order. The candidacy
of Mr Trump is a result. Those who reject the chauvinist response must come forward with imaginative
and ambitious ideas aimed at re-establishing that balance. It is not going to be easy. But failure
must not be accepted.
Our civilisation itself is at stake.
More on this topic
07/15/2016 at 5:14 pm
Art Berman also has an article dealing with Peak Oil for economic reasons. It looks like a lot
of agreement lately on this issue between experts.
Ron Patterson ,
07/15/2016 at 5:32 pm
Oil Prices Lower Forever? Hard Times In A Failing Global Economy
Yeah, this is a very good article. Art understands how the world works.
Energy is the economy. Energy resources are the reserve account behind currency. The economy
can grow as long as there is surplus affordable energy in that account. The economy stops growing
when the cost of energy production becomes unaffordable. It is irrelevant that oil companies can
make a profit at unaffordable prices.
texas tea ,
at 9:34 pm
Let's break a few hearts:
Reno Hightower ,
at 3:23 am
"U.S. shale is the lowest cost option for new oil production and is likely to be more competitive
than conventional offshore drilling, according to a new report from Wood Mackenzie."
That sounds true tt but in the world of $50 oil, I do not think either one, offshore or shale,
texas tea ,
at 6:57 am
"Worldwide, average oil production costs have fallen by $19 a barrel to $51 a barrel. At least
for now, the oil industry has squeezed its production costs down to 2009 levels, and drillers
could make a profit extracting 9 million barrels a day over the next decade, a 20 percent increase
from the days of $100 oil.
In West Texas, oil companies could make money in the Bone Spring and Wolfcamp tight oil plays
with $37 a barrel oil, while their rivals in the Eagle Ford Shale in South Texas could turn a
profit at $48 a barrel. The average break-even price in North Dakota's Bakken Shale is $58 a barrel.
In Oklahoma's Scoop region, it's $35 a barrel, Wood Mackenzie estimates."
I think I have mentioned here before, OKLA is happening, and "appears" to be the lost cost
LTO play in US. Now that does not mean I know a damn thing about the oil business but it does
mean you boys should keep a eye out in the future for considerable production coming out of this
area as "development" gets underway.
"... it seem that the IP's out of the Bakken in the Daily reports are trending towards the "less spectacular"? Lots of sub 1,000, and more than a few sub 500 BO IP. ..."
"... I always thought that EOG was the "darling" of the group. But, they having the lowest % of remaining – 36% (64% produced). In that regard, with respect to the production remaining, can you advise "about" how many years of production is represented for an average producer that you note? ..."
shallow sand ,
at 1:06 pm
This comment is without me doing any analysis, but does it seem that the IP's out of the Bakken
in the Daily reports are trending towards the "less spectacular"? Lots of sub 1,000, and more
than a few sub 500 BO IP.
Enno Peters ,
at 1:33 pm
I created a presentation where I show where
oil production from existing shale US wells is heading in the coming years. It only includes
the actual & projected production of horizontal wells that started production before 2016.
at 1:52 pm
Excellent work Eno, thanks. I notice that the cumulative production of 2008 and 2009 wells is
much higher than other years. Any explanation?
at 5:24 am
Thanks, the main reason for that is that those were mostly Bakken wells, and Bakken wells are
more productive than the ones in other basins.
at 2:40 pm
Enno – Excellent information! I always thought that EOG was the "darling" of the group. But, they
having the lowest % of remaining – 36% (64% produced). In that regard, with respect to the production
remaining, can you advise "about" how many years of production is represented for an average producer
that you note?
at 6:08 am
at 10:49 am
I don't get your question exactly, can you rephrase? The remaining production is all the production
that is still expected from the legacy wells, in the coming 20 years, although most of it will
of course be produced early on.
You answered it. Everything in the next 20 years. I was wondering if it was a truncated number
of years, like next 5, etc.
at 1:55 am
Watcher, doesn't Russian production reflect the strength of the dollar vs ruble rather than a
disassociation from money altogether?
at 2:42 am
It's not just Russia. It's KSA, too. Ron's numbers lay it out.
shallow sand ,
at 6:47 am
It's Been Two Full Years of price decline. There is no more . . . oh it's just some transitory
effects and we should just wait. Hell, if you wait for anything you'll eventually see it, and
declare that moment verification.
It's not about some "when". It's the area under the curve. All this time it's not happening,
because it's all gone away since 2009. And it's never coming back.
It makes sense to me that in the areas where production costs more, production is declining, while
where production costs less (Middle East and Russia) production is holding steady to rising.
shallow sand ,
at 7:01 am
Let's see where we end up at end of 2016.
Good point, which AlexS has verified previously.
Ron Patterson ,
at 6:57 am
Why should price matter when it's defined in what has been exposed as whimsically defined pieces
of printed paper?
at 8:41 am
Only a tiny fraction of all money is in paper printed form. The vast majority of all money
is just an electronic entry in a bank somewhere. The form money is in, either in paper notes or
as an electronic entry in a bank account, does not change the value of that money. Lots of things
can change the value of money, but the fact that it is either printed or in entry form changes
Russia is seriously hurting because of the low price of oil and Venezuela is dying because
of the low price of oil. How can anyone on earth possibly believe that price does not matter?
The low price of oil has a different effect on different producers. In many places the cost
of production is still below the price of production. So these folks are producing every barrel
possible just to try to stay afloat. But in places where new production cost more than the current
price, production is dropping drastically.
You cannot measure every barrel produced with the same ruler. Production costs differ and this
difference has a corresponding difference in production.
at 9:49 am
Russian oil companies are largely shielded from negative effects of low oil prices by:
1) the depreciation of the ruble, which makes oil prices higher in ruble terms and costs lower
in dollar terms;
2) the Russian oil tax system, which imposes much higher taxes when oil prices are high and much
lower when prices are low.
But Russia is not typical.
In most other countries producers are much more exposed to the price effects
Russian oil production vs. oil price, 2013-16
And KSA up even more?
at 11:46 am
Production cost differential was true in mid 2014 as well as now.
The price is less than half what it was and two full years have passed. Production is up in
the two countries that represent what, a full 25% of the global output.
You guys are contorting yourselves to make an overwhelming reality fit your preconception.
These central banks don't have any idea what trillions upon trillions have done. Hell, Fed governors
have explicitly said they don't.
The "Financial System" is nothing but a bunch of Ponzi Systems.
How else does a small default trigger the collapse (Japan 1997, USA 2008) of the entire interbank
Goldman Sachs appointed central banks
Does that come across as legitimate? And that Shadow Banks are somehow disconnected from the
regulated banks? Nonsense.
Short term debt in these "Money" markets is Private Money. Fake Money. Ponzi Money. The Ponzi
Operators control the central banks, not the respective governments. Read the new legislation
after 2008 where government was cut out of the loop.
Isn't it funny when their is a run in the Shadow system by the default of a small firm that
it PERMANENTLY impairs the ENTIRE real economy.
The definition of Money is More Transactions (Bigger Ponzi) than anybody else. There is nothing
real about it because relationship banking disappeared long ago.
Originate a loan, package it, get rid of it, and collect a fee. More loans (transactions),
more fees to collect, more power. More subprime = Greater power.
Shale is Subprime Oil.
"... There seems to be a general assumption that the larger conventional producers can choose to significantly ramp up production when they like, but I doubt that is true. Saudi have just bought on line the Shaybah extension which was a pretty big job to extend production facilities for 'just' 250,000 bpd. ..."
"... Usually in mature fields the wells become limiting. For example as water cut increases not only does the water displace the oil but also, as it is significantly heavier than the oil/gas mix in the wellbore, the overall flow rate declines rapidly. ..."
George Kaplan ,
at 8:27 am
There seems to be a general assumption that the larger conventional producers can choose to
significantly ramp up production when they like, but I doubt that is true. Saudi have just bought
on line the Shaybah extension which was a pretty big job to extend production facilities for 'just'
Doug Leighton ,
at 9:35 am
Production from a given field may be limited by different parts of the facilities at different
times. Typically the limit will be the lowest nameplate capacity between each of: the reservoir
/ wells; oil processing; produced water handling; associated gas compression; total liquids flow;
water (or gas) injection capacity. Overall power availability may also be limiting at some combination
of oil/water/gas flow below each one of their individual limits.
Usually in mature fields the wells become limiting. For example as water cut increases
not only does the water displace the oil but also, as it is significantly heavier than the oil/gas
mix in the wellbore, the overall flow rate declines rapidly. However this need not always
be the case. In Saudi I think they design and manage their facilities to keep the production at
the oil flow design capacity, which is nominally set to give 2% depletion of the original estimated
ultimate reserves per year. To maintain this they maintain excess capacity in the other key facilities.
In particular they need to control the water cut by using intelligent wells, expandable liners,
and recompletions, or when needed drill new wells higher in the formation. If they lose control
of the water cut, which must happen one day (ideally for them it would be the day they flow the
last barrel of oil and shut in but that is not going to happen) then the likely limit will be
water injection capacity. Water has to be pumped in to maintain pressure to exactly balance the
volume pumped out. For the produced water in the oil that is about one for one, for a stock tank
barrel of oil it is higher because the oil shrinks as it cools, but mainly because of the gas
that is lost. This is ratio is called the formation volume factor and typically is 1.1 to 1.8.
Say for a field the water cut is 50% and the FVF is 1.5, this means 2.5 bbls of injection water
are needed to give one bbl of oil. I don't know the Saudi figures but something like that for
them means 25 mmbwpd injection (that represents a huge amount of large pipes and pumps, and power
– the water isn't like domestic supply, it has to be at high pressure). It's not normally economic
to build in much spare capacity for the piping systems (but who knows with Saudi). Once water
can't be controlled in horizontal wells the cut increases quickly, if it can't be handled within
the facilities and enough pressure maintenance from injected water supplied then the oil production
has to fall (i.e. wells choked back) accordingly.
If at a capacity limit (or limits) increasing production may need new wells, but more than
that completely new topsides facilities, anything more than a few tweaks would need at least 2
to 3 years engineering, procurement and construction effort.
Informative comment. Thanks George
at 10:52 am
Very good overview. I worked with a field set up to handle extra water, but they forgot the water
heat capacity requires more heaters. So as water cut climbed we had to use lots of chemicals to
get clean oil, until we could install more heaters and heat exchangers. These bottlenecks can
be really subtle, so I took to asking for full surface system simulation runs at 90 % field water
cut to see where the troubles were bound to pop up.
at 3:01 pm
I think Survivalist and Petro have nailed a very good analysis of the situation. When prices crashed
most National Oil Companies and many independent producers tried (and are trying) to produce more
to maintain income. The real tragedy comes when prices remain low and production falls like in
Venezuela. Lack of investments guarantees that this will happen eventually to most producers,
and then once production falls enough we will get very destructive price spikes.
at 3:36 pm
shallow sand ,
at 4:20 pm
…while indeed initiated by geology, this time "PEAK" shall be by the way – and in the form
of low prices…
As I said before:
….more than $65-$75/brl/oil kills economy….less than $60brl/oil kills Shallow and his colleagues….
take your pick….
We have reached our limits…
Let's keep the party going for a little while longer and enjoy it responsibly.
$60 doesn't kill us. I have been hoping for a $55-$65 price band, but we are way below that.
We got $44 average for all of 2015, $32 average for first six months of 2016. We are around
$5 off WTI.
That's why break even at $50 is crap. We haven't been there for 20 months on a sustained basis.
As AlexS notes elsewhere, I'm starting to think $50 breakeven refers to per BOE, which means
shallow sand ,
at 5:12 pm
Petro. I understand.
at 9:29 pm
My point is our savior, US LTO, needs a higher price than our 111 year old stripper field.
Which means to me there is a real problem on the horizon.
Petro, we see eye to eye on much these issues, but I do think that the world economy will be able
to pay much more for oil than 60$ without crashing. Probably more than $100.
The stuff is too useful, and money will be diverted from other uses to keep buying it.
We'll see, one way or another….
at 6:25 am
Dennis Coyne ,
at 10:07 am
You cannot simply look at the oil price between 2010 and 2014 and deduce that those prices
are sustainable for the World economy. You need to understand the situation under which those
prices were made possible at the time. The period 2009-2014 was a time when Chinese debt was growing
at unsustainable levels to fuel an oil demand that compensated the demand contraction from an
overindebted Europe that could not accept those high oil prices and went into recession and debt
crisis. The period 2009-2014 was also a time when central banks engaged in exceptional ZIRP and
quantitative easing policies with most countries significantly increasing their public debt.
But there is only one China and all significant economies have now a high level of indebtment
so a very rapid growth of debt has become a lot less likely. At the same time ZIRP and quantitative
easing policies are a one way avenue of increasing risk, decreasing effect, and extremely difficult
The oil price crash has probably delayed the next economic crisis. However the world economy
is in no position to assume the oil prices required to guarantee the level of investment required
to increase oil production above 2015 levels.
Oil depletion, debt, and low economic growth, will all work to make 2015 the year of Peak Oil.
If we enter a period of high oil price volatility due to mismatches between production and demand
that will be very destructive both to the economy and to oil production.
at 11:30 pm
Possibly $100/b is a problem, but there is a lot of room between $50/b and $100/b. When oil
supply decreases, oil price will increase. How much oil prices can increase without damaging the
World economy is far from clear.
One can arbitrarily claim $75/b is the magic number that will make the economy crash,
nobody knows. There might be a sweet spot between $75/b and $95/b where oil supply can
either be maintained or possibly increase slightly and not cause World output to decline. World
debt to GDP has been relatively stable since 2010 based on BIS data.
Javier- you (and Petro etc) may be right, and the civil difficulties of Venez and poverty of Moldova
may be coming to places far and wide.
Dennis Coyne ,
at 6:38 am
I'm thinking that most commerce will still churn on, even if oil is 100$. Maybe just wishful thinking.
I agree. There is very little evidence that oil over $75/b kills the economy, what it has done
recently is result in too much oil production relative to demand.
What has changed is that there is no one willing to cut back on output. From 1930-1970, Texas
was the World's swing producer and from 1985-2014 Saudi Arabia fulfilled that role. Now we will
see volatility in oil prices unless some new cartel is formed, maybe OPPC (Organization of Petroleum
US, Norway, UK, Russia, Brazil, and Canada could join the OPEC nations and have a production agreement
to control oil prices.
This would never happen, but maybe each nation should regulate output as the RRC once did for
Texas, it would help with oil price volatility.
"... Survey of international spending reveals a 19% decline compared with an initial estimate of 14% in January. The Middle East remains an area of stability while the largest negative revisions come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America is still the weakest region, where spending is expected to decline 30%. ..."
"... IOCs and independents are projected to have spending declines of 24% this year, while other independents are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively." ..."
George Kaplan ,
at 1:48 am
E&P spending is much lower this year than was expected even after the big cuts initially announced.
US independents and Canada in particular are hurting. Middle East is the only place holding up.
"In its midyear E&P spending update, Cowen & Co. now estimates global expenditures to fall
24% compared with a 16% decline in its January survey. The downward revisions were primarily driven
by larger spending cuts from North America-focused E&Ps and major international oil companies.
In this update, Cowen & Co. expects US spending to decline 45%, reflecting oil prices of $40/bbl
and natural gas prices of $2.50/MMbtu. This was down from a 22% estimate at the time of January's
survey, which was based on $48.5/bbl oil and $2.50/MMbtu gas. Canada spending is expected to fall
33% compared with an earlier estimate of an 18% falloff.
Survey of international spending reveals a 19% decline compared with an initial estimate of 14%
in January. The Middle East remains an area of stability while the largest negative revisions
come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America
is still the weakest region, where spending is expected to decline 30%.
IOCs and independents are projected to have spending declines of 24% this year, while other independents
are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively."
"... That break-even bullshit is just nonsense. What is happening in oil industry is debt deflation aka "you have to eat less". That debt deflation is direct result of debt infused shale development by Wall Street in order to prevent debt deflation in the rest of economy. Wall Street kicked the can of debt deflation in economy for about 10 years with 3 major shale plays in US. That' all. ..."
"... Why do I need Wood Mackenzie's interpretation? Reality does not need any interpretation. US oil production is down 1 mil within a year from the peak and folding like cheap wall mart chair, oil price is still in the basement at $46, and shale has outstanding credit card debt of 300 billion. And you are dialling 1 – 800 VISA to finance more drilling of shale in OKLA hoping for different outcome. Priceless, as VISA would say. ..."
"... Their only purpose is to keep you in a dream. You are dreaming. If you are in oil business today the present is almost a hell. You can endure it only because of the hopes that you have projected into the future. You can live today because of the tomorrow. You are hoping something is going to happen tomorrow, some doors to paradise will open tomorrow. They never open today. And when tomorrow comes, it will not come as tomorrow, it will come as today – but by that time your hope have moved again. ..."
"... I again wish all would realize that OK resource plays are generally wet gas plays, not oil plays. Just did a quick search. Found 539 hz wells with first production in OK since 1/1/15. ..."
"... Again, another quick search, looks like over 1/3 of the OK Woodford wells with first production 1/13 or later have hit 1 million mcf. Also looks like most are producing over 30K mcf per month. ..."
at 8:17 am
Production costs dropped because the industry hit the fan and today there's contractors, subcontractors,
and individuals willing to give bargain prices to survive as long as possible, hoping demand will
rise and they can return to being profitable.
at 8:23 am
Yes, a trillion $ old economy industry can't cut prices by 50% by "innovation" in a few years.
It's all about subcontractors working for just cashflow to pay interrest on their loans.
at 10:59 am
When they all resume drillig to these low prices (and in shale all drill in the same few sweatspots
with the low $ oil), prices will crash up since there are few workers left to do all this additional
Prices are low as long nobody drills…
No kidding. Back in the 1980's I was a junior supervisor, but I was asked to cut budgets to the
bone during the 1985-86 crash. The whole process was incredibly stressful, but we managed to achieve
significant cuts by having rather forceful talks with service providers to get cuts. In some cases
they had to sit down with unions and their subcontractors, but it seemed to work pretty well after
we cancelled a platform painting contract on the spot after they refused to reduce their charges.
at 3:11 pm
As I said.
at 9:14 am
I don't know any oil business here, since I sit in Germany, but we have lot's of industry.
And in the last crisis 2007 you could produce for lots less than break even, just to maintain
a cashflow. Workers have been on short labor here (It's a thing from the state to prevent firing,
it paid out big time later).
But when the economy picked up prices got higher again. So – you get only the low prices when
few people buy – if everyone and his dog would run out drilling new wells these low prices would
be history again.
texas tea ,
at 10:20 am
That break-even bullshit is just nonsense. What is happening in oil industry is debt deflation
aka "you have to eat less". That debt deflation is direct result of debt infused shale development
by Wall Street in order to prevent debt deflation in the rest of economy. Wall Street kicked the
can of debt deflation in economy for about 10 years with 3 major shale plays in US. That' all.
OKLA plays maybe will get drilled but they will not make a dime like the rest of shale did
not make dime by extracting oil, other than by doing the ponzi type of reselling of leases, companies
to a greater fool.
at 11:02 am
you are ignorant, I personally have wells in this trend that will make money, that is working
interest that I pay out of pocket money for and get a real after tax return. You should take a
little time to learn and then think before you write, or you can continue to show the cyber world
just how little you really know about the subjects you write about. decisions decisions…:-) I
have not ask because i do not care but your understanding of the real world seems rather limited,
do you profess to know more or have equal or better credentials, education and information, or
more access to objective worldwide data within the oil and gas business than Wood Mackenzie? Thats
what I thought
texas said: "Wood Mackenzie?… made of credentials, education and information…."
texas tea ,
at 6:54 pm
That is scary.
Why do I need Wood Mackenzie's interpretation? Reality does not need any interpretation. US oil
production is down 1 mil within a year from the peak and folding like cheap wall mart chair, oil
price is still in the basement at $46, and shale has outstanding credit card debt of 300 billion.
And you are dialling 1 – 800 VISA to finance more drilling of shale in OKLA hoping for different
outcome. Priceless, as VISA would say.
at 10:34 pm
I now must assume you may have graduated high school, and were in the bottom 1/4 of your class
and you may have taken remedial reading. So here is a little help for someone who is just so special.
From the report:
"In West Texas, oil companies could make money in the Bone Spring and Wolfcamp tight oil plays
with $37 a barrel oil, while their rivals in the Eagle Ford Shale in South Texas could turn a
profit at $48 a barrel. The average break-even price in North Dakota's Bakken Shale is $58 a barrel.
In Oklahoma's Scoop region, it's $35 a barrel, Wood Mackenzie estimates."
Do you see where it said Bakken @$58? This is in North Dakota, not OKLA.
Do you see where it said Eagle Ford @ $48. That is in South Texas. again not in OKLA, Those $$$
numbers were far higher last year.
Now can we name the two biggest LTO fields in the US, stay with me, I know this is hard for you.
It is the Bakken and the Eagleford, both on a field wide basis are currently uneconomic and have
been for well over 20 months. Most all LTO and conventional production world wide was uneconomic
for the 4th 1/4 2015 and the first 1/4 2016, perhaps that explains why production has dropped.
With regard to the economics of my personal business, it will not matter what I say, because
you are just plain to ignorant to understand our business. But I will again share, if at such
time we see $4.00 nat gas and $75 oil, this play will have risk weighted returns that exceed most
of any projects I have been associated with in my 30 years. That includes a number of very prolific
trends within the lower 48
Dennis Coyne ,
at 11:28 am
You really don't understand numbers. So let's leave at that. I will tell you the secret about
these reports you religiously read by Wood Mackenzie, Citi, Bloomberg whatever.
Their only purpose is to keep you in a dream. You are dreaming. If you are in oil business
today the present is almost a hell. You can endure it only because of the hopes that you have
projected into the future. You can live today because of the tomorrow. You are hoping something
is going to happen tomorrow, some doors to paradise will open tomorrow. They never open today.
And when tomorrow comes, it will not come as tomorrow, it will come as today – but by that time
your hope have moved again.
You go on moving ahead of yourself – this is what dreaming means. You are not one with the
real, you are somewhere else ( like $4.00 nat gas and $75 oil), moving ahead, jumping ahead. You
Have a nice day.
Hi Texas Tea,
at 3:44 pm
And what has your ROI been so far on these wells after taxes?
Dennis Coyne ,
at 11:20 am
I have asked texas the same question few weeks ago and no answer so maybe he is still calculating
True story: Once I was standing in line for some Korean fast food and guy next to me start
talking. "How yu duing?" , "What do yuo do"….. so the guy says "I am investor" for a living .
I said "Cool". So he starts talking about his investments in real estate, abraka-dabra …so he
, "profit 200% in 2 years, so you can make 100% annually"
And my antennas start beeping right away. The guy was adding the percentages to calculate the
profit after 2 years!!! Catastrophe. So he did not even know how to calculate a profit and he
If he was making 100% annually then 2*2=4, so he had 4 times more money than in the beginning.
4 times more is 300% and not 200% as he claimed. That was in 2005-6 when RE was "hot" and anyone
was RE "investors", so maybe he is shale investor today :-)
Hi Texas Tea,
shallow sand ,
at 11:28 am
I doubt those quoted costs are full cycle costs in those plays for the average well. They may
be based on the fantasy type curves found in investor presentations. When one takes a close look
at actual average well output data, the well profiles in investor presentations are usually about
a factor of 2 higher than real world results. So the real world full cycle (vs point forward)
cost per barrel would be roughly double what you quoted above.
I again wish all would realize that OK resource plays are generally wet gas plays, not oil plays.
Just did a quick search. Found 539 hz wells with first production in OK since 1/1/15.
13 have hit 100,000 cumulative BO or more.
shallow sand ,
at 12:53 pm
248 have hit 300,000 cumulative mcf gas or more.
It is a wet gas play, just like the Woodford has been for decades. Springer is the only one
I would call an oil resource play, I think it is generally agreed to be uneconomic at present
Woodford wells will produce a lot of gas, obtain a premium gas price due to high BTU, and produce
little water, so LOE per mcf is low.
I cannot comment on the economics of these wells, but do believe the data, thus far, shows
these to be gas. Yes, many have initial high % of liquids, but the liquids disappear quickly.
I think TT has generally agreed with me on these observations.
Again, another quick search, looks like over 1/3 of the OK Woodford wells with first production
1/13 or later have hit 1 million mcf. Also looks like most are producing over 30K mcf per month.
at 4:20 pm
OTOH, most did not produce any oil in the most recent month. The big oil producers currently
are for wells less than 12 months old.
Safe to say these wells generally will produce a lot of gas. I am not able to discuss economics,
do not have enough data.
Hope I'm not annoying anyone as I have typed this numerous times. My beef is the wells are
advertised as oil wells, in an "oil window" with IP and cumulative production measured in BOE.
Kind of like calling driver assist function " Auto pilot".
Your posts are always solid information and useful. Anyone who might be annoyed is no-one you
need even think about. I bet a lot of us here count on you.
Can we please see an end–an END–to the snotty tone in far too many of the comments here? There
is no call for any comment of the "I see that you have no understanding of (fill in the blank)"
type, or of anything like it.
Content and accuracy of post are important. Clarity of presentation is important. Civility
and courtesy are important. What anyone posting here thinks of anyone else posting here is not
important for the public discussion.
"... Therefore overall the undiscovered resources might now be zero for maximum, median and minimum cases, which would be quite a bit different from USGS numbers of 4, 7 and 11 Gb respectively, with a mean of 7.4 Gb. ..."
George Kaplan ,
07/15/2016 at 2:41 pm
The USGS should revisit their earlier estimate for undiscovered resources in Bakken / Three Forks
now that about four times as many wells have been drilled since the first release.
The way USGS estimated the undiscovered resources was quite simple. Split the region into 6
production zones (which may be stacked); for each zone split into core (sweet spots) and non core
areas to give twelve assessment units. For each unit estimate total area (A), drainage area for
each well (a), EUR per well (U), the proportion of the area unexplored (p) and the chance of not
getting a dry well when drilling (r). Then resource is (A/a)*U*p*r. The values are different for
each zone and they actually give three alternatives: maximum, median, minimum. Then they add up
all twelve (or 36) estimates to give the total (or 3 different totals). The values for A, a and
U might have some reasonable chance of being correct but p and, especially, r are just best guesses;
for the maximum cases r is greater than 80% for all areas and for some minimum cases 90% and higher
In reality the E&Ps stopped wild cat permitting when they got to 50% success rate (and
falling fast) in 2013/2014. Therefore, in the core areas p might be zero – the lease holders know
what is there and have already included it in 'proven undeveloped', they don't need to drill to
be confident – and in the non core areas p * r is zero – the lease holders drilled wildcats out
from the core until they started hitting dry holes, and then they stopped because there is nothing
else to find (r is zero for all the remaining p). Therefore overall the undiscovered resources
might now be zero for maximum, median and minimum cases, which would be quite a bit different
from USGS numbers of 4, 7 and 11 Gb respectively, with a mean of 7.4 Gb.
Ron Patterson ,
at 12:09 pm
Baker Hughes Rig Count is out. US oil rigs up 6, gas rigs up 1. Permian up 2, Williston
down 1, Eagle Ford unchanged.
"... Steve Kopits at Princeton energy advisors has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by 8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just 2.4 Mbpd. ..."
at 4:12 pm
The price of oil seems pretty darn important. Art Berman had an interview with Chris Martenson
on peak prosperity that projects with some 20 Billion barrels of oil have been deferred due to
the current low price. That's a pretty large amount of oil that's not coming online when required
as a result of price.
Not to mention that oil is becoming much harder to find, Steve Kopits at Princeton energy advisors
has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by
8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just
Society is energy constrained and it's showing up in the economy with crazy effects like NIRP,
where $13 Trillion worth of global bonds now yield negative returns from Zero just a few years
ago, think about that, paying someone to borrow your money!! Also an economy where young people
aren't getting decent jobs to pay for incredibly overpriced house prices as evidenced by affordability
ratios, where populism and extremism is on the rise globally as well as large swathes of society
are left out of prosperity. Energy is the ability to do work, without increasing energy supplies
society has to fundamentally change.
"... There are still a lot of projects due this year and next and even into 2018, but not quite enough to make up for the declines. ..."
"... Probably 2.5 to 3.5 mmbpd fall over the three years barring big, unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs. ..."
"... It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest and drilled like mad to get even more oil, explored, developed new fields. These operations have normally completion times of a few years, so they come alltogether online now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round. ..."
"... How can anyone possibly deny the effect the price of oil has on the production of oil? The very high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale oil production to boom. However shale oil production is just uneconomical at prices below $60 a barrel, or somewhere in that neighborhood. ..."
"... Almost every barrel being produced cost a different amount to produce. There is a thing called "the margin". That is what it cost to produce the most expensive barrel of oil being produced. As the price of oil drops, barrels being produced "at the margin" starts to drop off. More expensive oil stops being produced, less expensive oil continues to be produced. Of course there is a delay between the price dropping below the margin and that marginal barrel dropping from production. ..."
Florian Schoepp ,
at 1:09 pm
Has depletion finally gained the upper hand? My back of the envelope calculation:
George Kaplan ,
at 1:28 pm
Conventional: 78 million barrels at 4% = 3.1 million barrels.
All other: 19 million barrels at 10% = 1.9 million barrels.
Total: 5 million barrels per year
2015 was a year where a lot of projects came online that were developed in previous years. There
is less of that this year. So 2 million for this year seem reasonable. Next year will be interesting.
If demand keeps growing, there should be a substantial shortfall, draining storage. The only way
to close the fast growing gap is a miraculous recovery of Libya and others that are currently
hampered by political unrest.
There are still a lot of projects due this year and next and even into 2018, but not quite enough
to make up for the declines.
at 4:50 pm
Probably 2.5 to 3.5 mmbpd fall over the three years barring big,
unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless
a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of
very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs.
We'll get to see the truth behind LTO sustainability and flexibility; that and depending on how
demand goes, plus the real storage numbers will determine prices and therefore future supply developments.
Overall though I agree, I think we will suddenly find ourselves short at some point in the next
5 years, and without many options.
Why would you want to drain storage when you can kill competing consumption with weapons.
Dave P ,
at 11:14 pm
Because the people you are trying to kill will then attempt to kill you?
at 3:51 pm
Watcher – I think that Ron "almost" has you pegged. Basically he notes that no one can be that
Fu–ing stupid. But, he may be wrong. What in the hell are you talking about when you say "you
can kill competing consumption with weapons?" Why would anyone in the supply chain want to kill
at 11:48 am
It's erroneous to decline "all other" at a fixed rate like you propose.
at 4:54 pm
Output of KSA vs July 2014 at $100+ /b up about 600K bpd. Less than 1/2 price and up 600K bpd.
at 5:33 pm
What's the latest Russia vs July 2014, Ron? Similar? Probably.
Imagine that. Price didn't matter.
It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest
and drilled like mad to get even more oil, explored, developed new fields.
Dennis Coyne ,
at 6:15 pm
These operations have normally completion times of a few years, so they come alltogether online
now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round.
Ron Patterson ,
at 6:34 pm
You won't convince Watcher that price matters, but most of us agree that price matters.
How can anyone possibly deny the effect the price of oil has on the production of oil? The very
high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale
oil production to boom. However shale oil production is just uneconomical at prices below $60
a barrel, or somewhere in that neighborhood.
Dammit, it is as plain as the nose on your face. Price determines production. Does Watcher
really deny that simple fact? No, Dennis, you are simply mistaken. Watcher is not so dumb as to
deny that simple fact…. Is he???
at 8:48 pm
Watcher has BEEN denying it, as steadily as if somebody were paying him by the word, for as far
back as I can remember.
at 8:53 pm
Some people, quite a few actually, believe God looks after their lives for them on an every
day basis, and no amount of evidence, good or bad, is enough to shake this conviction.
Watcher apparently believes in some UNIDENTIFIED POWER that keeps oil coming regardless of
the price, or perhaps more accurately, keeps it coming even while controlling the price and forcing
it down by half or three quarters.
Of course there might be another explanation. Maybe he just enjoys rubbing everybody nose in
the apparent failure of the market system in the case of oil.
The explanation is simple enough, in principle. The oil industry is the biggest and slowest
moving of all industries, when it comes to NECESSARILY operating on a five to ten year time scale
in terms of making production decisions.
Being an orchardist, I am personally quite comfortable with such planning time scales, because
my kind of work is planned on a very similar time scale. If I miscalculate , meaning guess, really,
what the price of apples will be ten years down the road, and plant too many new trees, I am not
just going to take a chainsaw or bulldozer to my orchard because the price collapses. I wait it
out, and hopefully OTHER orchardists go broke first. Old trees will be dying, there is depletion
in apples, lol.
The production decision making process is triply compounded in difficulty by what we usually
forget , because in a forum such as this one, the discussion is centered around BUSINESSMEN out
to make a living, folks such as Mike, Shallow Sand, Texas Tea, etc. They make rational decisions,
as best they can.
What we forget is that the oil industry is an industry dominated by governments, and governments
are notoriously clumsy in managing their business affairs when circumstances demand action.
Politicians, be they Saudi kings or socialist Venezuelans, or right wing dictators or more
middle of the road types, are NOT going to do anything to upset their citizens, or piss them off,
if it can be avoided. Laying off a few tens of thousands of people is just not DONE until there
is NO OTHER choice.
Nobody would notice if we laid off half the people who work in the post office here in the
USA. Every body I know , excepting my cousin who is a carrier, and the post master, thinks we
could get along JUST FINE delivering the mail three days a week instead of six.
Politicians at the top of the heap are mostly interested in one thing, that thing being to
stay in power, and to do that, they play an incredibly complicated, fluid game maintaining the
network of supporters who ENABLE them to STAY in power.
Expecting them to act like BUSINESSMEN running a business is naive. As a rule, they will never
do anything proactive in order to solve a problem that might just go away by itself. When they
DO do something , it is to be expected that the doing will be undertaken much later than it ought
to be, and that it will be inadequate to deal with the problem until the problem becomes an existential
ONCE all the chips are on the table, and it's literally do or die, or be sent home, out of
office and out of power, governments can do some pretty spectacular things, such as mobilize to
fight a flat out war.
Things aren't that bad yet, in the countries dependent on oil revenues,excepting Venezuela.
Maduro is actively constructing a police state in hopes of staying in power.
The industry has excess capacity. It took years to build that capacity, and the economy couldn't
absorb the amount of oil coming to market at a hundred bucks, so the price collapsed. The economy
IS absorbing the oil coming to market, about the same amount , at about forty bucks.
It will take a WHILE for the excess capacity to dry up.Maybe another year or two, maybe less,
maybe longer. If the economy turns sour, it will take longer.If the electric car revolution really
comes to pass, on the GRAND SCALE, and very quickly, demand destruction will mean there is so
much excess capacity that the price will stay low for a long time.
There is nothing involved in understanding the oil price question that requires more than a
basic understanding of supply and demand, plus an additional understanding of the relevant time
scales and the nature of GOVERNMENTS as opposed to BUSINESSMEN making decisions.
If businessmen were running the post office, we would have half as many postal employees, lol.
Maybe even less.
OTOH, I notice 2 yrs later KSA is producing 600K bpd more oil at less than half the price.
at 9:08 pm
And what is Russia producing now at less than half the price? (asking again since Ron tracks
Oh, and more fun, y'all recall the big drilling investment from the majors got cut in Jan 2014?
It`s called delayed effect.
at 6:28 am
Farmers have generally done the same thing, collectively, when the price of whichever crop they
R DesRoches ,
at 8:10 am
As an individual guy growing corn, or wheat, or rice, or apples, I cannot produce enough, or
cut back far enough, to influence the market price. What I CAN do, is go flat out to produce every
possible last bushel, going for the all important marginal dollar that might enable me to survive
short term. This is what the SMALLER oil producers are doing, by and large.
While producing flat out individually, and collectively, we make the price crash even lower,
and stay in the pits longer, but then this is what drowning men who cannot swim do in the water-
try to survive by pushing themselves up by pushing another man under.
The game changes when one (or more) supplier is big enough and rich enough to have pricing
power and staying power running at a loss. In that case, the big boy can "sweat" the little fellow
, in the words of John D Rockefeller, running him out of business, deliberately.
Now this didn't take long at all while Rockefeller was running a small local company out back
in the early days of big oil, but it can take a hell of a long time when the little guy is a sovereign
government, or a giant corporation. I should say that SA and Russia are engaged in BOTH ways,
producing flat out to maximize revenues, plus hoping to run some competitors out of the market,
at least temporarily.
Folks who aren't TOO simple minded to think a little also realize there is such a thing as
war and politics, and that war can be fought in markets as well as with guns. The USA basically
broke the old USSR by making it impossible for that now dead empire to compete with us on building
guns, never mind butter, plus encouraging the Saudis to flood the market and deprive the Soviets
of oil revenue. Hard core D types will never admit that this is true however, because it is grounds
for being kicked out of the party to admit that a Republican has ever succeeded at doing anything
at all except creating more and bigger problems.
There is an element of WAR being played out in the oil markets now, and for the last year or
two, and it will continue to be important for a while.
Anybody who thinks anybody in DC, excepting oil state congress critters and oil lobbyists,
gives a flying fuck about the oil industries problems has a near zero understanding of economic
politics. Cheap gasoline is an elixer that is damned good for the OVERALL economy, and as good
as a zanax for soothing the nerves of consumers. To expect the Obama administration to do anything
to raise the price of oil, when raising it would cost D 's elections, is tantamount to insanity.
Who can remember this quote? "It's the economy, stupid"?
Hells bells, the R party rakes the D 's over the coals for LOWERING the price of oil by insisting
on higher fuel economy standards, lol.
And one last little bit of ranting, and I will lay off for an hour or two , at least, so help
me Jesus. This is history we are talking about, not a goddamned thirty minute tv show.
Things that matter take time in real life.
Looking at what Ron has said that the threshold for LTO production is $60, what I find important
is that just a few years ago that threshold was in the $80 to $100 range.
texas tea ,
at 1:27 pm
Even at today's prices, $45 to $50 range, we have seen the oil directed rig count, increase
over the past few weeks.
This indicates that some of the better plays have a lower threshold.
As we go out in time I would not be surprised that the $60 threshold will move down again.
at 3:45 pm
absence of some new technology, I expect we are at the lows of what LTO break-even cost will be
for the best LTO plays. As oil prices pick up and balance sheets get better the drilling companies,
Fracking co will begin to have some better pricing power and I expect they will use it. So for
a time expect break even to stay low but begin to rise "somewhat" as prices move up. I still think
$75 WTI is what the best companies in the best plays really need to MAKE MONEY not just break-even
in a normal business environment. (lets says 1200 rigs running lower 48 ) I know I would be drilling
in the areas I am active at that price, $50 not so much and only with a gun to my head :-)
RDR – I am never sure of what anybody said about breakeven, unless it is accompanied by a complete
Ron Patterson ,
at 10:43 am
If an oil company has undrilled land in an LTO area, that (1) needs production to "hold" the
lease, and/or (2) has bank debt related to its lease acquisition, then: Their breakeven point
and perspective is totally different (lower) than if you or I tried to determine our breakeven
point if we went someplace, bought acreage and drilled a well.
OTOH, I notice 2 yrs later KSA is producing 600K bpd more oil at less than half the price.
Dennis Coyne ,
at 1:09 pm
And what is Russia producing now at less than half the price?
Watcher, you cannot measure every barrel produced with the same yard stick.
It cost KSA about $20 a barrel to produce oil, more in some places less in others. Therefore
they want to produce every barrel possible in order to meet their budget.
It cost Russia pretty much the same to produce oil from their old fields. But it cost them
much more to find new oil and produce it. The price of oil is hitting Russia very hard but will
hit them much harder unless the price rises soon.
The low price of oil is killing Venezuela. Their production is dropping. It will drop much
further unless the price starts to rise soon.
Almost every barrel being produced cost a different amount to produce. There is a thing
called "the margin". That is what it cost to produce the most expensive barrel of oil being produced.
As the price of oil drops, barrels being produced "at the margin" starts to drop off. More
expensive oil stops being produced, less expensive oil continues to be produced. Of course
there is a delay between the price dropping below the margin and that marginal barrel dropping
Watcher, it is just fucking insane to claim that price has no effect on production. You have
to know better than that. Why on earth do you think the number of oil rigs working in North Dakota
dropped fro 215 rigs four years ago today, to 30 today? It was because the price of oil dropped
and for no other reason. And that decline in the number of rigs is currently having a dramatic
effect on oil production in North Dakota.
Dennis Coyne ,
at 12:49 pm
Prices dropped in June 2014, maybe you mean Jan 2015?
Ron Patterson ,
at 3:09 pm
It may be that I am misinterpreting Watcher. I have been mistaken in the past and history tends
Dennis, I was just being sarcastic. I know that Watcher really does believe that the price of
oil makes no difference. Imagine that! He also believes that money is just a piece of paper.
R DesRoches ,
at 8:35 am
If you go to any of the big LTO independent oil companies web sites and look at their investor
presentations you will find two trends.
Dennis Coyne ,
at 9:19 am
First the day to drill wells have come down in the last couple of years, in many cases by over
Second with bigger fracs and changes in the mix, IPs and EURs have gone up, in many cases above
What this means is that the break even price of oil has been coming down.
We are starting to see rigs coming back to the patch at oil prices below $50. IMO as the oil
prices moves up towards the $60 level the rate of increase in rig counts will also increase.
IPs have gone up due to more proppant and more frack stages, this increases well cost.
R DesRoches ,
at 10:54 am
I doubt the breakevens have fallen below $75/b for full cycle costs.
Yes they have added more stages with closer spacing, but total well cost to drill and complete
have gone down.
Dennis Coyne ,
at 2:31 pm
According to EOG, 2/3 rds of the lower cost is from sustainable efficiency improvements and
the rest is from lower service costs.
According to EOG spud to td has gone down by 43% to 59% (Bakken), and LOE has gone down 30%
from $17.02 to $11.86.
At the same time 120 day production rates in 2014 has gone from 10.7 Bbl per foot to 20.9 Bbl
in Q1 2016.
Bottom line more oil at lower cost has reduced break even oil price?
Hi R DesRoches,
shallow sand ,
at 11:10 am
Well costs went down and then back up as more esoteric well designs have become common. Note
that supd costs may have gone down and LOE might also have gone down, but you are leaving out
completion costs which is about 2/3 of the capital cost of the well, the decrease in spud cost
has been more than offset by increases in completion costs (this includes the fracking). On balance
total well cost has probably not decreased much and for the newer designs with more stages (up
to 40 or so in the Bakken) and higher amounts of proppant, total well cost has probably increased.
The "lower well cost" presented in the investor presentations is for an older "standard well
design". The newer well designs that have increased the output per well cost an extra 1 or 2 million
per well (in the ND Bakken/Three Forks).
What does frac water cost per barrel, or at least a range? How many barrels of water are needed
to drill and complete a hz well? How much does trucking the water cost.
Dennis Coyne ,
at 2:56 pm
I know all this can vary, so just some ranges will do.
Hi R DesRoches.
at 11:49 pm
I took a look at oil rigs operating in the Permian, Bakken and Eagle Ford.
For those 3 plays we have:
Total oil rigs- 213
Bakken – 28T, 27H
EF- 27T, 26H
Permian-158T, 138H, 74% of oil rigs in the big 3 LTO plays.
Of the 28 oil rigs added since May 27, 2016, 22 were added to the Permian and all were horizontal
rigs. The Bakken added 5 horizontal rigs and 1 vertical and the EF 1 vertical rig.
Based on this, Eagle Ford is probably the high cost play, then Bakken, with the Permian perceived
as best at the moment of the LTO plays.
Data from Bakker Hughes pivot table.
"…Imagine that. Price didn't matter…"
just like you were wrong when you wrote: "…countries with CBs cannot default…", you are incorrect
with this one, as well.
(I clarified that for you here:
-Not only price does matter, but It is PRECISELY due to the low prices that everybody is producing
in a " …the last big party…" mode, … last oomph, if you will!
All they can!
….and has little to do with the "delayed effect"…. if there is such a thing.
"... "Today, because of improvements in horizontal drilling technology, you've got a play that could be the largest onshore play in the country, not only in size of potential reserves but also in a real extent." ..."
"... The End of Normal ..."
"... The End of Normal ..."
by Arthur Berman
When energy costs are low, the costs of doing business are correspondingly low. When energy prices
are high, it is difficult to make a profit because the underlying costs of manufacture and distribution
are high. This is particularly true in a global economy that requires substantial transport of raw
materials, goods and services.
The global economy expanded in the mid-1980s through 1990s when
oil prices averaged $33 per barrel. Then, oil prices nearly doubled to an average of $68 per barrel
from 1998 to 2008, and subsequently increased after 2008 to 2.5 times more than in the 1990s. When
oil prices exceed $90 per barrel, the global economy is no longer profitable.
... ... ...
America's Golden Age
The United States
experienced a golden age of economic growth and prosperity
during the 25 years following World War II. This period
forms the basis for U.S. and indeed global expectations
that growth is the norm and that recessions and slow
growth are aberrations that result from mis-management of
the economy. This is the America that today's populists
want to return to.
The Golden Age, however, was a singular phenomenon that
is unlikely to recur. After 1945, the economies and
militaries of Europe and Japan were in ruins. The U.S. was
the only major economy that survived the war intact.
Having no competition is a huge competitive advantage.
The U.S. was the first country to fully convert to
petroleum, another competitive advantage. A barrel of oil
contains about the same amount of energy as a human would
expend in calories in
years of manual labor
. Crude oil contains more
than twice as much energy as
and two-and-a-half times more than
it's a liquid that can be moved easily around the world
and put in vehicles for transport.
In 1950, the U.S. produced 52% of the crude
oil in the world
and was largely
self-sufficient. Texas was the largest U.S. producing
state and the Texas Railroad Commission (TXRRC) controlled
the world price of oil through a system of allowable
production that also ensured spare capacity.
... ... ...
Tight oil used the same horizontal drilling and hydraulic
fracturing technology that had been pioneered in earlier
shale gas plays. The technology was expensive but once oil
price topped $90 per barrel in late 2010 and stayed high
for the next 4 years, the plays were deemed successful by
producers and credit markets.
U.S. tight oil and
deep-water production resulted in a second coming of sorts
with monthly crude oil output reaching 9.69 million
barrels per day in April 2015. That was 350,000 bopd less
than the 1970 peak of 10.04 million bopd.
The difference of course was cost. In 1970, the market
price of a barrel of oil in 2016 dollars was $20 per
barrel versus $100 from 2011 to 2014, and $55 per barrel
And this is precisely the problem with the almost
universally held belief that technology will make all
things possible, including making a finite resource like
oil infinite. Technology has a cost that its evangelists
forget to mention.
The reality is that technology allows us to extract
tight oil from non-reservoir rock at almost 3 times the
cost of high-quality reservoirs in the past. The truth is
that we have no high-quality reservoirs left with
sufficient reserves to move the needle on the high global
appetite for oil. The consequence is that to keep
consuming and producing as we always have will inevitably
cost a lot more money. This is basic thermodynamics and
not a pessimistic opinion about technology.
... ... ...
Nevertheless, in a zero-interest rate world, there was
great enthusiasm for yields greater than conventional
investments like U.S. Treasury bonds and savings accounts
that continue to pay less than 2%. Bank and
mezzanine debt, high-yield corporate ("junk") bonds and
share offerings promised yields in the 6 to 10% range. As
long as prices were high and the plays were marginally
profitable, risks were downplayed and capital was almost
unlimited. Two years into the oil-price collapse, capital
is more limited because banks and investors have been
Producers continue the mantra that costs keep
going down and well performance keeps getting better.
Those with some history and perspective, however, know and
remember that they always say that but the balance sheets
never reflect the claims.
In 1996, the late Aubrey McClendon made the
about the Louisiana Austin Chalk
"Today, because of improvements in horizontal
drilling technology, you've got a play that could be the
largest onshore play in the country, not only in size of
potential reserves but also in a real extent."
That play was a total failure for McClendon's
Chesapeake Energy Corporation and today Chesapeake is on
the verge of bankruptcy for the second time.
People want to believe that things keep getting better
and that they won't have to change their behavior-even if
these beliefs defy common sense and the laws of nature.
... ... ...
Post-Financial Collapse monetary policies, the cumulative
cost of nearly four decades of debt-financed growth, and
the return of higher oil prices have exhausted the
economy. Most debt is non-productive, interest rates
cannot be increased, and 2016′s low oil prices are still
one-third higher than in the 1990s (in 2016 dollars).
Producers and oil-field service companies are on life
support. One-third of U.S. oil companies are
. Yet some analysts who have no experience
working in the oil industry proclaim break-even prices
below $40 per barrel and breathlessly predict that the
business will come roaring back when prices exceed $50.
Producers don't help with outrageous claims of
profitability at or below current oil prices that exclude
costs and are not generally applicable to their
As a result, the public and many policy makers believe
that tight oil is a triumph of American ingenuity and that
energy will be cheap and abundant going forward. The
that U.S. crude oil production will
exceed the 1970 annual peak of 9.6 mmbpd by 2027 and that
tight oil will account for almost 6 million barrels per
day. Although I have great respect for EIA, these
forecasts reflect a magical optimism based on what is
technically possible rather than what is economically
Renewable energy will be increasingly part of the
landscape but its enthusiasts are also magical thinkers.
In 2015, renewables accounted for only
of U.S. primary energy consumption. No matter the
costs nor determination to convert from fossil to
renewable energy, a transition of this magnitude is
unlikely in less than decades.
Solar PV and wind provide much lower
than fossil fuels and have limited
application for transport–the primary use of energy–
without lengthy and costly equipment replacement. The
daunting investment cost becomes critically problematic in
a deteriorating economy. Although proponents of renewable
energy point to falling costs,
of all solar panels used in the U.S. are
from China where cheap manufacturing is financed by
It is telling that energy and its cost can hardly be
found among the endless discussions about the economy and
its failure to grow. Technology optimists have
disparaged the existence of an energy problem
least the 1950s. Neither unconventional oil nor renewable
energy offer satisfactory, reasonably priced, timely
solutions to the dilemma.
As political leaders and economic experts debate
peripheral issues, the public understands that there is
something horribly wrong in the world. It is increasingly
difficult for most people to get by in a failing global
economy. That is why there are political upheavals going
on in Britain, the United States and elsewhere.
The oil industry is damaged and higher prices won't fix
it because the economy cannot bear them. It is
unlikely that sustained prices will reach $70 in the next
few years and possibly, ever.
The British exit from the European Union adds another
element of risk for investors. Lack of investment will
inevitably lead to lower production, supply deficits and
price spikes. These will further damage the economy.
The future for oil prices and the global economy is
frightening. I don't know what beast slouches toward
Bethlehem but I am willing to bet that it does not include
growth. The best path forward is to face the beast.
Acknowledge the problem, stop looking for improbable
solutions that allow us live like energy is still
cheap, and find ways to live better with less.
*J.K. Galbraith, 2014,
End of Normal
, p.54. Much of the economic
interpretation in this post is based on Galbraith's work.
**J.K. Galbraith, 2014,
The End of Normal
Petroleum Geologist and Professional Speaker
Visit my website for more information: artberman.com
"... Manafort mentioned the return of Glass-Steagall specifically as a counterpoint against Hillary Clinton, arguing it was Democrats that were the ones actually beholden to big banks. "We believe the Obama-Clinton years have passed legislation that has been favorable to the big banks, which is why you see all the Wall Street money going to her," he said. "We are supporting the small banks and Main Street." ..."
"... Good! Screw the Clintons and crony capitalism. ..."
"... Bob Rubin already cashed the checks....Mission Accomplished. ..."
"... Laugh Track Deafening) ..."
"... How different would it be now if everyone in that photo had died simultaneously BEFORE Clinton signed it? ..."
"... Panic attacks and violent pangs on Wall Street tomorrow? Or will they just pour billions more into the Clinton corruption campaign? ..."
"... Hang the Clintons, Bushes, and all the damned banksters with them. Then your reforms might mean something ..."
While we know better than to trust politician promises, we were surprised to read that today the
GOP joined the Democrats in calling for a repeal of Gramm-Leach-Bliley, the Financial Services Modernization
Act of 1999 pushed through by none other than Bill Clinton, and will seek a return to Glass-Steagall,
the banking law launched in 1933 in the aftermath of the Great Depression meant to prohibit commercial
banks from engaging in the investment business, and which according to many was one of the catalysts
that led to the Global Financial Crisis.
The Hill, Paul Manafort, Donald Trump's campaign manager, told reporters gathered in Cleveland
Monday that the GOP platform would include language advocating for a return of that law, which was
repealed under President Bill Clinton, husband of, well you know...
"We also call for a reintroduction of Glass-Steagall, which created barriers between what big
banks can do," he said.
Including that language in the GOP platform comes shortly after Democrats agreed to similar language
in their own, calling for an "updated and modernized version" of the law.
However before anyone gets their hopes up, recall that a party platform is not binding but is thought
to reflect the values of the party.... until the values change as a result of Wall Street "incentives"
because if there is one thing US "commercial banks" can not afford it is a separation of their depository
and investment activities.
The GOP platform has not yet been officially released, although the convention is expected to
approve it later Monday. Nonetheless, the embrace of Glass-Steagall by both parties is a telling
indication of how unpopular Wall Street remains with the public, years after the financial crisis.
Manafort mentioned the return of Glass-Steagall specifically as a counterpoint against Hillary Clinton,
arguing it was Democrats that were the ones actually beholden to big banks. "We believe the Obama-Clinton
years have passed legislation that has been favorable to the big banks, which is why you see all
the Wall Street money going to her," he said. "We are supporting the small banks and Main Street."
HRH of Aquitaine
Jul 18, 2016 5:15 PM
HRH of Aquitaine,
Jul 18, 2016 5:19 PM
Good! Screw the Clintons and crony capitalism.
18, 2016 5:24 PM
Bob Rubin already cashed the checks....Mission Accomplished.
ps.... So did I. Thanks Clintons
Jul 18, 2016 5:32 PM
Just break-up the banks into little itsy-bitsy pieces so they can't hurt anyone anymore.
– Mother Goose
What!!!! Is sanity breaking out!???!!!
Guess the big public utility banks are going to get broken up? (Laugh Track Deafening)
How different would it be now if everyone in that photo had died simultaneously BEFORE
Clinton signed it?
californiagirl -> Timmay •Jul 18, 2016 7:10 PM
Panic attacks and violent pangs on Wall Street tomorrow? Or will they just pour billions more
into the Clinton corruption campaign?
Perimetr -> californiagirl •Jul 18, 2016 7:24 PM
Hang the Clintons, Bushes,
and all the damned banksters with them.
Then your reforms might mean something.
Some 20 carmakers have committed to making automatic emergency braking systems a standard feature
on virtually all new cars sold in the U.S. by 2022, according to a new plan from the
National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.
Automatic brakes are designed to stop a vehicle before it collides with a car or another object.
Experts say that making them standard could prevent as much as 20 percent of accidents.
NPR's Sonari Glinton reports for our Newscast unit:
"Many cars on the road now have automated brakes. And when you're new to them, it's pretty scary
when the car stops on its own. But experts say automatic brakes could make the fender bender a
thing of the past.
"It's part of a push to fight the growing problem of driver distraction and a step closer to
driverless cars. Now carmakers have to figure out by 2022 how they'll integrate the systems."
NHTSA released a list of the car companies that have committed to the system:
"Audi, BMW, FCA US LLC, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Kia, Maserati,
Mazda, Mercedes-Benz, Mitsubishi Motors, Nissan, Porsche, Subaru, Tesla Motors Inc., Toyota, Volkswagen
"In 2012, one-third of all police-reported crashes involved a rear-end collision with another
vehicle as the first harmful event in the crash," according to the government's information page
on Automatic Emergency Braking systems.
It adds that AEB systems can either avoid or reduce the severity of some of those rear-end crashes.
In a statement about the plan, NHTSA says the "unprecedented commitment" from the automakers will
bring the safety technology to "more consumers more quickly than would be possible through the regulatory
"... It looks like the increase in GOR has finally stopped, at least for wells earlier than 2015. GOR for 2015 is still increasing fast. 2008 and 2009 are on the other hand decreasing. ..."
"... Here we can see that for 2009 there is a huge drop, about 6%. As a comparison it would translate into more than 50% in one year. ..."
"... This graph looks like a mess, I know. I hope you can make something out if though. It shows the percentage of wells that are producing in a certain month. There is a downward trend over time, but the oil price is not affecting it much at all. ..."
Hello guys. Here is my updated Bakken GOR graph. It looks like the increase in GOR has finally
stopped, at least for wells earlier than 2015. GOR for 2015 is still increasing fast. 2008 and
2009 are on the other hand decreasing. So what does this mean for production? Lets see in
my next graph bellow.
07/16/2016 at 9:07 am
Here we can see that for 2009 there is a huge drop, about 6%. As a comparison it would translate
into more than 50% in one year. But of course you should not extrapolate from a (cherry picked)
single month like that. For 2008 there is instead a slight increase. At least some of that can
be explained by that some wells that were previously not producing, are now back online. I don´t
know how much of an effect that has though. I´ll show more about that in my next graph. 2013 has
slowed down the decline since last month, but is still bellow 2012. So overall nothing dramatic
except for 2009.
07/16/2016 at 9:22 am
This graph looks like a mess, I know. I hope you can make something out if though. It shows the
percentage of wells that are producing in a certain month. There is a downward trend over time,
but the oil price is not affecting it much at all. It´s only this spring when the oil price was
in the 30s that you can notice some decline. But it´s not more than 1-2% of the wells that were
put offline. Never the less, there were some wells that were put back on production in May which
should have a positive effect on production. Also ,the total producing "days" for all wells combined
has increased by about 5% since last month (which I don´t show in any graph here).
07/15/2016 at 7:52 pm
Looking at Art Berman's chart below. World oil production since 2005, less US and Canada, has
been pretty much flat. This is despite the fact that prices have risen dramatically in that period
of time. So lets look at the other huge gainers since 2005.
Caelan MacIntyre ,
07/15/2016 at 9:29 pm
Russia: See the EIA's take above. Even if they are wrong, Russia's huge gains are gone forever.
Angola, Brazil, China and Colombia: China and Colombia have definitely peaked. Angola peaked
in 2010 and has declined slightly and been flat since then. Only Brazil has any hope of increasing
production, and tat not by very much.
Iraq: I believe Iraq has peaked. Some may disagree but there is no doubt that their best days
are behind them. They have far more downside potential than upside potential.
There is little doubt that all those countries will decline in the next few years regardless
of what the price of oil is. After all, if oil above $100 a barrel in the past did not sent them
producing massive amounts of oil, there is no reason to believe it will do so in the future.
That leaves the USA and Canada. To those massive high prices in the past few years, only
the USA and Canada responded. So… will higher prices bring on enough US and Canadian production,
to make up for the decline in the rest of the world… plus increase production enough to push production
above the 2015 peak?
Not a snowball's chance in hell will that happen.
Sobering, as Euan writes. Alarming I'd say.
07/15/2016 at 10:12 pm
In a possible future's retrospect, it may turn out to have come as a surprise how fast things
unraveled sociogeopolitically so close after the peak.
Fossil fuel, within a certain EROEI range is, of course, power. It powers pseudoeconomies,
governpimps, and their militaries. And now China and Russia, for two examples, are not nearly
as 'backwoods' as they may have been, historically. They have become, 'Westernized'…
Ron Patterson ,
07/16/2016 at 7:15 am
What are your reasons for calling the Iraq peak?
After a year of trying to increase their production they have been unable to do so. Now things
are likely to get worse. Iraq depends almost entirely on outside contractors. Also there has been
a steady stream of skeptical news coming out of Iraq.
07/16/2016 at 11:23 am
Iraq struggles to match January's record oil production
Iraq is Opec's second-largest producer after Saudi Arabia and has ambitious plans to increase
production capacity to between 5.5m b/d and 6m b/d by 2020.
This target, which has been revised downward in recent months, has been viewed with scepticism
as a budget crisis is limiting the federal government's ability to pay companies that are producing
oil in Iraq. These include from BP, Royal Dutch Shell and Russia's Lukoil.
Although they are developing some of the lowest cost easy-to-access deposits of oil in the
world, the fields need more investment to maintain production at current levels and increase future
capacity. At the same time, the government in Baghdad is requesting companies reduce spending.
"We're taking more risk to keep production the same, while not getting paid. We can't
continue to produce for 2-3 years like this, it's not possible," said one executive at an oil
company operating in Iraq. "Maybe they can achieve 6m b/d by 2030."
These numbers are through June. As you can see they still have not matched January's numbers.
And their contractors are not getting paid. Now what would you think would be the likely effect
on Iraqi oil production?
07/16/2016 at 5:05 am
My guess is that Iraq oil production will struggle to maintain current levels over the next
couple of years and then drop rapidly as their ongoing religious civil war makes the situation
too dangerous for continued foreign investment.
Another guess is that the global economy will be in recession by 2020, reducing demand, lowering
world oil prices, and pushing many national economies into bankruptcy. The impact for countries
highly dependent on oil revenue to maintain social services and stability will be devastating
and we'll see the breakdown of societies and the rise of dictatorship.
All wags of course. But it seems to me, generally, that geopolitics and social/economic problems
will begin to overtake any geologic and technological limitations in world oil production. Venezuela
is a current example, and now Iraq, starting with their "budget crisis" and workers "not getting
paid", as your article describes. In other words, above ground factors are determining production
and not the lack of oil in place.
Thanks for your reply, always appreciate your clear-headed thinking.
Matt Musalik has been making similar graphs for a long time showing the same:
Probably Art is basing his incremental graph in Matt's ones.
Also very noteworthy is Matt's graph on "Conventional Oil Plateau" from his May 2015 update on
"... He argues that what just happened is that investors suddenly decided that economies were not going to return to normal any time soon. ..."
Paul Krugman interpreted the recent decline of 10 year safe interest rates from extremely
low to astonishingly low as a capitulation to stagnation. He argued (convincingly) that
investors have decided that short term safe interest rates will remain extremely low for a
long time (evidently at least 10 years) and that the post 2008 pattern of slack demand, low
inflation and extremely low interest rates is the new normal. It is probably best to just
op-ed, but he considered and rejected the arguments that the low safe interest rates
are the result of a flight to quality.
I want to compare the recent sharp decline in
interest rates to the sharp increase in 2013 which is called the "taper tantrum". I can't
manage an alliteration however, stagnation capitulation rhymes and is (arguably) the mirror
image of the taper tantrum.
I make the comparison for two reasons. The first is that the conventional term "taper
tantrum" asserts that the cause of the 2013 increase is an announcement by the Federal
Reserve Open Market Committee (FOMC) that they were considering tapering the monthly pace
of quantitative easing (not reducing their assets but reducing the rate of increase). This
interpretation would imply that I have been wrong for years as I argue that quantitative
easing has only small effects. This is a silly personal reason for continuing to discuss
the taper tantrum, so I will move that discussion after the jump.
The second reason is that there is an alternative interpretation of the 2013 increase
which is the exact mirror image of Krugman's stagnation capitulation hypothesis. I tried to
present it here. I
expressed the idea even worse than usual so I will try again now (and ask the reader to
trust me that this is what I had in mind then)
The story is that investors assumed back in 2012 and 2013 that the economy and interest
rates would return to normal some time fairly soon. Then in Spring 2013, they decided that
this time had come so they all demanded higher returns on bonds. This (not successfully
written) story is the exact mirror image of Krugman's op-ed. He argues that what just
happened is that investors suddenly decided that economies were not going to return to
normal any time soon.
This is relevant to the old debate about QE, because if markets can shift one way
without FOMC action, they could have shifted the other way for reasons other than a bland
FOMC announcement. More grinding old axes after the jump.
... ... ...
If we had a whole century ahead of
us to transition, it would be
Unfortunately, we no longer have
that leisure since the second key
challenge is the remaining
timeframe for whole system
replacement. What most people
miss is that the rapid end of the
Oil Age began in 2012 and will be
over within some 10 years. To the
best of my knowledge, the most
advanced material in this matter
is the thermodynamic analysis of
the oil industry taken as a whole
system (OI) produced by The Hill's
Group (THG) over the last two
years or so (
THG are seasoned US oil industry
engineers led by B.W. Hill. I
find its analysis elegant and rock
hard. For example, one of its
outputs concerns oil prices. Over
a 56 year time period, its
correlation factor with historical
data is 0.995. In consequence,
they began to warn in 2013 about
the oil price crash that began
late 2014 (see:
In what follows I rely on THG's
report and my own work.
Three figures summarise the
situation we are in rather well,
in my view.
SEQ Figure \* ARABIC 1
– End Game
For purely thermodynamic reasons
net energy delivered to the
globalised industrial world (GIW)
per barrel by the oil industry (OI)
is rapidly trending to zero. By
net energy we mean here what the
OI delivers to the GIW,
essentially in the form of
transport fuels, after the energy
used by the OI for exploration,
production, transport, refining
and end products delivery have
However, things break down well
i.e. within 10 years the OI as we
know it will have disintegrated.
Actually, a number of analysts
from entities like Deloitte or
Chatham House, reading financial
tealeaves, are progressively
reaching the same kind of
The Oil Age is finishing now, not
in a slow, smooth, long slide down
, but in a
rapid fizzling out of net energy.
This is now combining with things
like climate change and the global
debt issues to generate what I
enough to bring the GIW to its
In an Alice world
At present, under the prevailing
paradigm, there is no known way to
exit from the
within the emerging time
constraint (available time
has shrunk by one order of
magnitude, from 100 to 10 years).
This is where I think that
guessing right. Many readers are
no doubt familiar with the
effect illustrated in REF
_Ref329530846 \h Figure 2
– to have to run fast to stay put, and even faster to be able to move forward.
The OI is fully caught in it.
13, 2016 at 12:51
I find in this article
too many crass claims
and too few simple
facts, and even those
Take graph 1. It
suggests, that in
2015, i.e. a year ago,
the EROI of oil were
1.17. In fact it was
always more than 5, in
most cases even more
then 10, afaik, even
for the "new sources",
i.e. tar sands &c.
energetic cost of the
transition: In a first
renewables and saving
has paid for itself
within a year. This
means, that if we
transform 10 % of our
to renewables and
saving per year, we
have to use 10 % of
our available power
for it. This is
certainly a lot. But
it is certainly
doable, if we want.
The latter, of course,
is the nub of the
I have the feeling i
have to wade through a
rhetoric jungle to
search for valuable
information. May be a
matter of taste, i
to go from
A to B,
as such it
and 3 will
of this or
"... In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields ..."
"... Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said ..."
China's crude oil output over the first half of the year stood at 101.59 million metric tons,
down 4.6 percent and the lowest six-month figure since 2012, Bloomberg
reports. The decline reflects China's stated shift from an industry-focused economic model
to a more service-oriented one. It is also related to a drive by the government to cut the country's
environmental footprint, struggling with a reputation of China as one of the most polluted places
on earth. Low oil prices were also a factor in the production trend.
In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants
such as PetroChina and CNOOC shuttering unprofitable fields and turning to low-cost imports instead.
Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said,
with June recording the weakest growth.
High stock prices are "not evidence of a healthy economy":
Bull Market Blues, by Paul Krugman, NY Times
: Like most
economists, I don't usually have much to say about stocks. Stocks
... have a lot less to do with the state of the economy or its
future prospects than many people believe. ...
Still, we shouldn't completely ignore stock prices. The fact that
the major averages have lately been hitting new highs ... is
newsworthy and noteworthy. What are those Wall Street indexes
The answer, I'd suggest, isn't entirely positive..., in some ways
the stock market's gains reflect economic weaknesses, not
We measure the economy's success by the extent to which it
generates rising incomes for the population. But stocks ... only
reflect the part of income that shows up as profits.
This wouldn't matter if the
share of profits
in overall income were stable; but it isn't.
The share of profits ... has been a lot higher in recent years than
it was during the great stock surge of the late 1990s ... making
the relationship between profits and prosperity weak at best. ...
When investors buy stocks, they're buying a share of future
profits. What that's worth to them depends on what other options
they have for converting money today into income tomorrow. And
these days those options are pretty poor... So investors are
willing to pay a lot for future income, hence high stock prices for
any given level of profits. ...
This may seem, however, to present a paradox. If the private sector
doesn't see itself as having a lot of good investment
opportunities, how can profits be so high? The answer, I'd suggest,
is that these days profits often seem to bear little relationship
to investment in new capacity. Instead, profits come from some kind
of market power... And companies making profits from such power can
simultaneously have high stock prices and little reason to spend.
Consider the fact that the three
most valuable companies
in America are Apple, Google and
Microsoft. None of the three spends large sums on bricks and
In other words, while record stock prices do put the lie to claims
that the Obama administration has been anti-business, they're not
evidence of a healthy economy. If anything, they're a sign of an
economy with too few opportunities for productive investment and
too much monopoly power.
So when you read headlines about stock prices, remember: What's
good for the Dow isn't necessarily good for America, or vice versa.
Friday, July 15, 2016 at 09:16 AM
anne -> anne...
Friday, July 15, 2016 at 09:19 AM
July 15, 2016
Paul Krugman's Stock Market Advice
Paul Krugman actually did not make any predictions on
the stock market, so those looking to get investment
advice from everyone's favorite Nobel Prize winning
economist will be disappointed. But he did make some
interesting comments * on the market's new high. Some of
these are on the mark, but some could use some further
I'll start with what is right. First, Krugman points
out that the market is horrible as a predictor of the
future of the economy. The market was also at a record
high in the fall of 2007. This was more than a full year
after the housing bubble's peak. At the time, house prices
were falling at a rate of more than 1 percent a month,
eliminating more than $200 billion of homeowner's equity
every month. Somehow the wizards of Wall Street did not
realize this would cause problems for the economy. The
idea that the Wall Street gang has some unique insight
into the economy is more than a bit far-fetched.
The second point where Krugman is right on the money
(yes, pun intended) is that the market is supposed to be
giving us the value of future profits, not an assessment
of the economy. This is the story if we think of the stock
market acting in textbook form where all investors have
perfect foresight. The news that the economy will boom
over the next decade, but the profit share will plummet as
workers get huge pay increases, would be expected to give
us a plunging stock market. Conversely, weak growth
coupled with a rising profit share should mean a rising
market. Even in principle the stock market is not telling
us about the future of the economy, it is telling us about
the future of corporate profits.
Okay, now for a few points where Krugman's comments
could use a bit deeper analysis. Krugman notes the rise in
profit shares in recent years and argues that this is a
large part of the story of the market's record high, along
with extremely low interest rates. Actually, the profit
story is a bit different than Krugman suggests.
The profit share had soared in the early days of the
recovery. The before tax share of net corporate income
went from a recession low of 16.9 percent of net income to
27.0 percent in the second quarter of 2014. The after-tax
share peaked at 20.4 percent in the first quarter of 2012.
However since then the profit share has trended downward.
In the most recent quarter the before-tax profit share was
23.9 percent, while the after-tax share was 17.5 percent.
This is most of the way back to the mid-1990s shares when
before-tax profits were around 21.0 percent of net
corporate income and after-tax shares were around 15.5
So, while profits had soared, the current market high
cannot be explained by a soaring profit share. We are
substantially below the peak shares from earlier in the
recovery. One caution here is that the quarterly data are
erratic and subject to large revisions. It is possible
that this picture will look very different when the
Commerce Department releases revised data later in the
The next issue is how we should think about a market
high. If the stock market moves in step with corporate
profits (i.e. the price to earnings ratio remains
constant), and the profit share of GDP remains constant,
then we should expect the stock market to continually
reach new highs. In other words, market peaks are not like
a new world record time in the mile, they are more like
the tree in the backyard growing each year. They should
not come as a surprise, nor be any cause for celebration.
The third point is that the stock market highs of the
late 1990s were definitely not cause for celebration. The
stock market was in a gigantic bubble. This was serious
bad news for the economy and millions of 401(k) holders
who saw their savings plummet in the crash of 2000-2002.
(Yes, they should have sat tight, but a lot of people
didn't realize this and it's not their job to be
professional investors.) From the standpoint of the
economy it was bad news because the crash led to a serious
downturn in the labor market.
The strong wage growth of the late 1990s quickly
dissipated as the labor market weakened. While the
recession officially ended in December of 2001, we didn't
begin to create jobs again until the fall of 2003. We
didn't get back the jobs lost in the downturn until
January of 2005. At the time, this was the longest period
without net job growth since the Great Depression.
For what it's worth, the Clinton crew was clueless on
the bubble. They wanted to put Social Security money in
the stock market assuming that the real returns would
average 7.0 percent annually. The actual average has been
about half of this rate.
Finally, Krugman notes that the most highly valued
companies in today's market are Apple, Google, and
Microsoft. Krugman points out that none of these companies
"spends large sums on bricks and mortar" and all three are
sitting on large cash hoards.
Both points are well taken. Investment in plant and
equipment has actually been falling in recent quarters.
This would be fine if the decline was offset by a boom in
research and development spending, but it hasn't been. Our
great idea companies don't have many good ideas about what
to do with all of their money.
But there is another point worth noting about the Big
Three. All three are companies that depend to a large
extent on government-granted monopolies in the form of
patent and copyright protection. We have made these
protections much stronger and longer over the last four
decades through a variety of laws and trade agreements.
Of course the point of these protections is to give an
incentive for innovation and creative work. But in a
period where we are supposedly troubled by an upward
redistribution from people who work for a living to people
who "own" the technology, perhaps we should not be giving
those people ever stronger claims to ownership of
technology. (Yes, this involves the Trans-Pacific
Partnership, among other policies.)
Anyhow, perhaps our leading economists will one day
take note of this issue. It took a long time to notice
that we had an $8 trillion housing bubble and that yes, it
could be a problem. But let's hope our economists is
-- Dean Baker
anne -> anne...
Friday, July 15, 2016 at 09:20 AM
Cyclically Adjusted Price Earnings Ratio, 1881-2016
(Standard and Poors Composite Stock Index)
July 14, 2016 PE Ratio ( 26.92)
Annual Mean ( 16.68)
Annual Median ( 16.04)
-- Robert Shiller
RC AKA Darryl, Ron -> anne...
Friday, July 15, 2016 at 09:51 AM
Dividend Yield, 1881-2016
(Standard and Poors Composite Stock Index)
July 14, 2016 Div Yield ( 2.03)
Annual Mean ( 4.39)
Annual Median ( 4.33)
-- Robert Shiller
THANKS! Dean's the best - as usual.
anne -> RC AKA Darryl, Ron...
Friday, July 15, 2016 at 04:16 PM
Dean Baker's response to Paul Krugman is excellent, and we
might consider arguing the matter further along both lines
with the need for increased domestic investment the focus.
anne -> RC AKA Darryl, Ron...
Friday, July 15, 2016 at 04:31 PM
anne -> anne...
Friday, July 15, 2016 at 04:36 PM
January 15, 2016
Shares of Gross Domestic Product for Private Fixed
Nonresidential & Residential Investment Spending,
Government Consumption & Gross Investment and Exports of
Goods & Services, 2007-2016
January 15, 2016
Shares of Gross Domestic Product for Private Fixed
Nonresidential & Residential Investment Spending,
Government Consumption & Gross Investment and Exports of
Goods & Services, 2007-2016
(Indexed to 2007)
The problem in fostering growth comes to either increasing
nonresidential investment or government spending
(hopefully for infrastructure formation). There is no
reason to think exports will increase significantly given
the relatively strong dollar and weak international growth
and slower population growth should not allow for
significant residential investment increases for some
sanjait -> RC AKA Darryl, Ron...
Friday, July 15, 2016 at 04:
Either nonresidential investment or government
spending is the answer then.
Yeah, DB calls out Krugman for not mentioning monopoly
rents right after Krugman explicitly mentions them, and
the Bernista crowd trumpets how great Baker is.
JohnH -> anne...
Friday, July 15, 2016 at 11:27 AM
It's not just Apple, Google and Microsoft. The whole
economy is increasingly dominated by monopolies and
oligopolies who can raise prices irrespective of demand.
pgl -> JohnH...
Friday, July 15, 2016 at 01:26 PM
Think about phone companies (Verizon, AT&T), cable TV
(Comcast, TimeWarner), Wall Street banks, soft drinks
(Coke, Pepsi), consumer goods (Procter and Gamble,
Unilever), airplanes (Boeing, Airbus), oil refineries,
pharmaceuticals, etc. etc.
Krugman is right that "profits come from some kind of
market power... And companies making profits from such
power can simultaneously have high stock prices and little
reason to spend."
For many of these companies, it is not about
intellectual property monopoly. Rather, it is about lack
of aggressive anti-trust enforcement over the last 30
years, the Obama years being about the worst on record.
Wow - liberal economist Paul Krugman got something right.
As far as your last fact free claim, I'll leave this issue
to those who actually know what they are talking about:
JohnH -> pgl...
Friday, July 15, 2016 at 02:09 PM
The article takes a circuitous route to show that Obama
has been more aggressive than Bush was...hardly a
resounding endorsement of Obama, given Bush's lax
pgl -> JohnH...
Friday, July 15, 2016 at 03:17 PM
I stand corrected--Obama wasn't the worst...thanks only
to Bush 43's dismal record.
Wow - a first for everything! You finally admit one of
your fact free rants is not reality. Progress!
JohnH -> pgl...
Friday, July 15, 2016 at 04:05 PM
Classic 'lesser of two evils' thinking: Obama was not as
bad as Bush, therefore Obama was great!
anne -> anne...
Friday, July 15, 2016 at 01:06 PM
Kind of like
declaring that Franklin Pierce was better that Millard
Fillmore, both lousy presidents...or that Miller is better
This is exactly the kind of logic you get from partisan
hacks like pgl...a committed Obamabot and Wall Street
sanjait -> anne...
Friday, July 15, 2016 at 04:41 PM
July 15, 2016
The 3 month Treasury interest rate is at 0.27%, the 2
year Treasury rate is 0.70%, the 5 year rate is 1.14%,
while the 10 year is 1.59%.
The Vanguard Aa rated short-term investment grade bond
fund, with a maturity of 3.3 years and a duration of 2.6
years, has a yield of 1.57%. The Vanguard Aa rated
intermediate-term investment grade bond fund, with a
maturity of 6.4 years and a duration of 5.4 years, is
yielding 2.29%. The Vanguard Aa rated long-term investment
grade bond fund, with a maturity of 22.0 years and a
duration of 13.2 years, is yielding 3.35%. *
The Vanguard Ba rated high yield corporate bond fund,
with a maturity of 5.7 years and a duration of 4.5 years,
is yielding 5.28%.
The Vanguard unrated convertible corporate bond fund,
with an indefinite maturity and a duration of 5.4 years,
is yielding 2.07%.
The Vanguard A rated high yield tax exempt bond fund,
with a maturity of 17.0 years and a duration of 6.3 years,
is yielding 2.13%.
The Vanguard Aa rated intermediate-term tax exempt bond
fund, with a maturity of 8.7 years and a duration of 4.8
years, is yielding 1.22%.
The Vanguard Government National Mortgage Association
bond fund, with a maturity of 5.7 years and a duration of
3.4 years, is yielding 1.89%.
The Vanguard inflation protected Treasury bond fund,
with a maturity of 8.7 years and a duration of 8.2 years,
is yielding - 0.26%.
* Vanguard yields are after cost. Federal Funds rates
are no more than 0.50%.
Nit picking Dean Baker, favorite of the disaffected
Bernistas who still haven't forgiven Paul Krugman,
sarcastically calls for Krugman to talk about monopolistic
rents for the big three tech companies but doesn't seem to
notice that Krugman explicitly mentioned monopolistic
rents for the big three tech companies in his blog post.
anne -> sanjait...
Friday, July 15, 2016 at 04:47 PM
Nitpicking Dean Baker, favorite of the -----------
Friday, July 15, 2016 at 01:22 PM
[ Creepy language is where I immediately
stop reading... ]
Possibly an aside, though I would argue this is related
and is surely important:
anne -> anne...
Friday, July 15, 2016 at 01:22 PM
There has long been a steady
refrain from most Western economists that China is doomed.
Lately the refrain has been that we will soon find Chinese
growth if continuing still slowing dramatically. Today, it
turns out that Chinese growth which was 6.7% on a yearly
basis in the first quarter was 6.7% in the second quarter.
For the New York Times and Wall Street Journal however...
pgl -> anne...
Friday, July 15, 2016 at 01:28 PM
July 15, 2016
China GDP Sends Troubling Signal on Economic Reform
Slower growth rate would have indicated country was
tackling excess industrial production, rising corporate
By MARK MAGNIER - Wall Street Journal
BEIJING-China maintained its growth pace of 6.7% in the
second quarter-a bad sign to those who were looking for
indications of economic restructuring.
Economists say a slower growth rate in the second
quarter over the first quarter's 6.7% pace would have sent
a welcome signal that China was tackling excess industrial
production, rising corporate debt and state-owned
Instead, by ramping up government spending and opening
the credit taps, Beijing is likely to fuel overcapacity
and see private companies crowded out by risk-averse state
banks and bloated state companies.
This comes despite repeated calls by Prime Minister Li
Keqiang and other senior officials to foster innovation,
entrepreneurship and structural reform in order to shift
the economy from credit-fueled infrastructure to high-tech
industry and services....
China is doomed? I don't think so. Talk to any
multinational and China is the new future. Although they
complain that the Chinese SAT is really tough on transfer
pricing enforcement. Our tax authority should take lessons
from their Chinese counterparts.
anne -> pgl...
Friday, July 15, 2016 at 01:36 PM
Talk to any multinational and China is the new future.
Although they complain that the Chinese State
Administration Of Taxation is really tough on transfer
anne -> pgl...
Friday, July 15, 2016 at 03:06 PM
[ Really interesting. ]
Talk to any multinational and China is the new future.
Although they complain that the Chinese State
Administration Of Taxation is really tough on transfer
anne -> anne...
Friday, July 15, 2016 at 01:30 PM
[ Again, critical for China and
just what Stephen Roach of Yale has noticed and several
times argued when interviewed on Bloomberg. ]
So Chinese growth less than 6.7% would mean China was
nearing doom, while growth at 6.7% means China is doomed,
because growth less than 6.7% would mean that even though
China slowing growth means doom for China at least slowing
growth would show that the advice to restructure the
economy of so many Western economists was being listened
to, but 6.7% growth shows China is not listening to the
advice of so many Western economists and that means, well,
anne -> anne...
Friday, July 15, 2016 at 01:33 PM
I think I understand.
sanjait -> anne...
Friday, July 15, 2016 at 04:52 PM
July 15, 2016
As China's Economy Slows, Beijing's Growth Push Loses
By NEIL GOUGH and OWEN GUO
High debt and a glut of unneeded factories are
hindering the government's usual method of using spending
and lending to create more activity.
Chinese growth is 6.7% with massive and unsustainable
government interventions, and potentially some book
Friday, July 15, 2016 at 01:33 PM
Meanwhile, people like Anne self-righteously
accuse anyone who points to China's poor econ fundamentals
and trends as being Western Imperialists, or something.
But if you feel so confident, go ahead and invest your
money in China. The opportunity cost is low, given low
rates in the devloped world, and they would certainly
welcome the cash influx.
IOW the real interest rate (CPI now @ 1.0%) is negative
for 3 month and two year treasuries, 0.14% for 5 years,
.57% for 10 years. If you invest in anything longer, a
saver runs the risk of losing your shirt if a) rates
unexpectedly go up or b) inflation rises forcing interest
anne -> JohnH...
Friday, July 15, 2016 at 03:14 PM
It seems that economists enamored with
inflation are oblivious (willfully?) to the consequences
of saddling peopling with as much poor yielding secure
debt as possible. Sure it will cheapen the real value of
government debt, their primary goal, but only by screwing
Unfortunately, higher inflation will make a lot of long
term lenders bankrupt (think mortgage companies) as
interest rates on borrowing short term exceed the interest
rates on mortgages, which are currently at historical
lows. To make matters worse, mark-to-market accounting
will decimate the value of their holdings.
IMO anyone who lends long term, institutions or
individuals buying 30 year bonds, is completely nuts.
Without long term lending to support economic growth, how
can the economy possibly grow?
Unfortunately, higher inflation will make a lot of long
term lenders bankrupt (think mortgage companies) as
interest rates on borrowing short term exceed the interest
rates on mortgages, which are currently at historical
lows. To make matters worse, mark-to-market accounting
will decimate the value of their holdings....
pgl -> JohnH...
Friday, July 15, 2016 at 03:19 PM
question to ask is how can and will a mortgage company
such as a Wells Fargo handle an increase in long term
interest rates. There is a reason Warren Buffett has Well
as a key Berkshire Hathaway holding and has recently been
buying more of the company. Wells will be fine, but how?
"How" is an important question. ]
"t seems that economists enamored with inflation are
JohnH -> pgl...
Friday, July 15, 2016 at 03:53 PM
More dishonest intellectual garbage.
Economist are not for high inflation. We are for full
employment. OK, OK - we know you are against full
employment but hey!
Oh, puleez! If 'liberal' economists were for full
employment, they would obsess about the Fed's employment
target. But they don't...they obsess about not enough
inflation, witout being very fussy about how to get more
sanjait -> JohnH...
Friday, July 15, 2016 at 04:49 PM
Do 'liberal' economists have such difficulty with
the English language that they constantly substitute the
word ' inflation' for 'employment?' Reading economic
papers or Yellen's statements, one might think so. it's
easy to see how much they struggle expressing their ideas.
But constantly substituting 'inflation' for 'employment'
is a bit over the top, even for tongue tied economists.
Raising rates creates jobs ... if it were opposite day.
Friday, July 15, 2016 at 04:47 PM
Technical but important point: it's not the *current*
profit share that matters for stock prices but rather the
way current share reflects on expectations of the future
that really matter.
So while Dean Baker, in his quest to
nit pick everything Paul Krugman says in order to bring
cheer to butt hurt Sandernistas everywhere (Who still
haven't forgiven PK for daring to criticize their
Beloved), does correctly note that profit share has
declined, he fails to realize that a cyclical factor
moving cyclically doesn't mean expectations of future
profit share haven't also risen.
The real weakness in investment is the lack of wage growth
which has limited consumer demand. Flat, or even
shrinking, consumer demand means flat or shrinking demand
for investment. When there is nothing to invest in, your
best bet is the stock market.
"... Game Players of Titan ..."
Industrial Production, June 2016:
"Vehicles held down industrial
production in May but not in June, making for a big 0.6 percent gain that is just outside Econoday's
high-end estimate" [
"Looking at details deeper in the report, the output of business equipment rose a solid 0.7 percent
but the year-on-year rate, in what is definitive evidence of weakness in business investment, is
in the negative column at minus 0.6 percent. The output of consumer goods, up 1.6 percent on the
year, rose 1.1 percent in the month in what is another good showing in this report." However: "The
headlines say seasonally adjusted Industrial Production (IP) improved. The year-over-year data remains
in contraction but the trend lines are now pointing towards improvement" [
"Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production.
Historically manufacturing year-over-year growth has been negative when a recession is imminent.
This index is nearing the warning area for a recession."
Empire State Mfg Survey, July 2016:
"The first anecdotal report on the factory sector for
the month of July is not very promising as the Empire State index barely held in the plus column"
Business Inventories, May 2016:
" Businesses are keeping their inventories in check amid
slow sales. Inventories rose only 0.2 percent in May following April's even leaner 0.1 percent rise.
Sales in May also rose 0.2 percent keeping the inventory-to-sales ratio unchanged at 1.40, which
is a little less lean than this time last year when the ratio was at 1.37″ [
"Retail inventories did rise an outsized 0.5 percent in May in a build, however, that looks to be
drawn down by what proved to be very strong retail sales in June. Manufacturing inventories fell
0.1 percent in May with wholesalers up 0.1 percent." But: "Econintersect's analysis of final business
sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved compared to
the previous month – but due to backward revisions the rolling averages declined. Inventory growth
was moderate. The inventory-to-sales ratios remain at recessionary levels" [
Retail Sales, June 2016:
"June proved a fabulous month for the consumer though May, after
revisions, proved only so so." Above consensus [
"Ex-auto ex-gas offers a gauge on underlying trends in consumer spending, a dominant one of which
is ecommerce as nonstore retailers popped a 1.1 percent surge in the month which follows even stronger
gains in prior months. Department stores, up 0.9 percent, show a big comeback in the month with sporting
goods & hobbies strong for a second month. An outsized gain, one that hints at adjustment issues
and the risk of a downward revision, is a 3.9 percent surge in building materials & garden equipment,
a component that had been lagging…. This report is a major plus for the second-half economic outlook
not to mention coming data on the second quarter (sales for April, after the second revision, are
at a standout plus 1.2 percent). The job market is healthy and the consumer is alive and spending."
A little cold water: "Retail sales improved according to US Census headline data. Our view of this
month's data is similar but there was a decline in the rolling averages – and downward revision to
last month's data" [
This Maine bear sunk more money into shelter and did a lot of gardening. I hate to think I'm an ideal
Consumer Price Index, June 2016:
"Price pressures evident the last two months down the
supply chain are not yet appearing in consumer prices" [
Caveat: "[I]nflation does not correlate well to the economy – and cannot be used as a economic indicator"
"In perhaps an early indication of a U.S. Brexit effect, the consumer
sentiment flash for July is down a sharp 4.0 points to 89.5. Weakness is centered in the expectations
component which fell 5.3 points to 77.1 for one of the very weakest readings of the last two years.
Weakness in expectations ultimately points to doubts over the jobs outlook" [
But: ""Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest
impact on the U.S. economy. Following the Brexit vote, it was mentioned by record numbers of consumers,
especially high income consumers," [Richard Curtin, the survey of consumers chief economist] said."
"[T]he National Retail Federation is forecasting only a modest pickup at U.S.
ports, with container volume that would hardly amount to a peak at all" [
"Transportation-sector analysts believe that rail volumes, which have declined
over the past year, may be bottoming out. Things are looking brighter for the second half of the
year, as natural gas and oil prices recover, driving more energy-related shipments. Seasonal grain
exports should also provide a boost" [
, "Has U.S. Rail Traffic Found Its Rebound?"].
"By creating a permanent record that can't be altered, blockchain is well-suited
for tracking diamonds and other goods where buyers want to know the origins and previous owners,
said Bill Fearnley Jr., a research director at International Data Corp" [
"UPS and FedEx expand pharmaceutical shipping channels to global market" [
]. Seems to be optimized for clinical trials and testing, however. "The international
drug market is swelling rapidly to accommodate the 20 to 30 million new Americans who have recently
become insured under the Affordable Care Act and, more broadly, the "silvering" of an aging global
population with growing medical needs." Because I don't get how the ACA spurs demands for international
pharma shipments to patients.
"Big Wall Street investors stopped buying real estate in large quantities back
in late 2014. In many cases big investors had front row seats at banks and were able to buy in bulk
and for incredibly low prices not offered to the public. This crowding out of course has caused two
major things to unfold: inventory to dwindle and a push up in prices for regular families looking
to buy. For the first time in history many things happened in the housing market including nationally
falling prices but also a large interest from Wall Street in single family homes. Now with prices
near previous peak levels many of these large investors are making the full exit by offering to sell
the homes to current tenants, for of course a modest increase. Those bailouts that were geared to
helping the public actually created a system that has slammed the homeownership rate lower and has
now jacked home prices up once again. Large investors are now making their final play by cashing
]. I'd want Yve's views on this, but selling to the little guy at the peak of the
market sure looks like a PE scam to me. Readers, do any of you have direct experience with this?
"Monetary financing of public sector spending isn't a giant leap from
where Japan is today – it could get there in a series of small steps. It would be more a case of
'drone money' than 'helicopter money' if the BOJ were to go from buying longer and longer-dated debt
with lower and lower coupons to something indistinguishable from zero-coupon perpetuals. But away
from such idle speculation, with monetary and fiscal policy working hand-in-hand to drive inflation
expectations up, and to drive investors out of domestic assets, there's room for the yen to weaken
(quite a lot) further; all the more so as the US economy stabilises" [SocGen,
Across the Curve
]. You can borrow
money for free and there's no government infrastructure program. Speaking of cashing out, is that
what the elites are doing globally? Not that I'm foily. The best science fiction novel with autonomous
vehicles that I can recall is Philip K. Dick's
Game Players of Titan
, and that was a depopulated
"[F]or Google, the ultimate outcome does not look bright. A new EU competition
chief is overseeing this barrage of cases, as European corporate giants line up against the Silicon
Valley behemoth. Meanwhile, as Google relies more on artificial intelligence to automate a range
of tasks that run its services behind the scenes, it could face a whole new round of conflict with
Europe. In the end, Google in Europe could wind up as a very different thing than Google at home"
"BP announced on Thursday it believes the final pre-tax cost of its Deepwater
Horizon spill will be $61.6bn or $44bn after tax" [
But no jail time for executives, since they have elite impunity, say for ecocide. I say let's look
forward and not back.
"[S]hipping companies fear the [Hague Tribunal's] ruling [on the "Nine-Dash
Line"] could embolden the Philippines and other smaller nations to assert their rights to the waters
more aggressively and that any conflict would disrupt ship-borne trade in the waters between Hong
Kong and Indonesia. Thousands of ships transit those waters daily, and a third of the world's liquefied
natural gas passes through the Straits of Malacca to the South China Sea" [
]. " Even if shipping isn't disrupted, companies say they face higher costs if
the standoff escalates since insurance companies are likely to drive up rates."
...As the very sharp Patrick Iber tweeted somewhere, the usual response to economic distress
in democracies with broad franchises is: "Throw the bastards out!" Consider the Great Depression:
Labour collapses in Britain in 1931. The Republicans collapse in the U.S. in 1932. And in
Then, I think, Dani firmly grasps the correct thread:
A greater weakness of the left [is] the absence of a clear
program to refashion capitalism and globalization for the
twenty-first century…. The left has failed to come up with
ideas that are economically sound and politically popular,
beyond ameliorative policies such as income transfers.
Economists and technocrats on the left bear a large part of
the blame. Instead of contributing to such a program, they
abdicated too easily to market fundamentalism and bought in
to its central tenets.
In retrospect, who can disagree? We misjudged the proper
balance between state and market, between command-and-control
and market-incentive roads to social democratic ends.
But then I must, again, dissent in part. Dani:
Worse still, [Economists and technocrats on the left] led
the hyper-globalization movement at crucial junctures. The
enthroning of free capital mobility-especially of the
short-term kind-as a policy norm by the European Union, the
Organization for Economic Cooperation and Development, and
the IMF was arguably the most fateful decision for the global
economy in recent decades. As Harvard Business School
professor Rawi Abdelal has shown, this effort was spearheaded
in the late 1980s and early 1990s not by free-market
ideologues, but by French technocrats such as Jacques Delors
(at the European Commission) and Henri Chavranski (at the
OECD), who were closely associated with the Socialist Party
in France. Similarly, in the US, it was technocrats
associated with the more Keynesian Democratic Party, such as
Lawrence Summers, who led the charge for financial
deregulation. France's Socialist technocrats appear to have
concluded from the failed Mitterrand experiment with
Keynesianism in the early 1980s that domestic economic
management was no longer possible, and that there was no real
alternative to financial globalization. The best that could
be done was to enact Europe-wide and global rules, instead of
allowing powerful countries like Germany or the US to impose
Tom aka Rusty said...
Going back to 1997, Rodrik is one of the few
economists who earned his pay.
Much of economics
has not been worth reading and not been worth
"... Neoliberalism is a form of economism in our day that strikes at every moment at every sector of our community. It is a form of extremism. ..."
"... Every totalitarianism starts as distortion of language, as in the novel by George Orwell. Neoliberalism has its Newspeak and strategies of communication that enable it to deform reality. In this spirit, every budgetary cut is represented as an instance of modernization of the sectors concerned. If some of the most deprived are no longer reimbursed for medical expenses and so stop visiting the dentist, this is modernization of social security in action! ..."
"... Social Darwinism predominates, assigning the most stringent performance requirements to everyone and everything: to be weak is to fail. The foundations of our culture are overturned: every humanist premise is disqualified or demonetized because neoliberalism has the monopoly of rationality and realism. Margaret Thatcher said it in 1985: "There is no alternative." Everything else is utopianism, unreason and regression. The virtue of debate and conflicting perspectives are discredited because history is ruled by necessity. ..."
"... In spite of the crisis of 2008 and the hand-wringing that followed, nothing was done to police the financial community and submit them to the requirements of the common good. Who paid? Ordinary people, you and me. ..."
Neoliberalism is a species of fascism
By Manuela Cadelli, President of the Magistrates' Union of Belgium
The time for rhetorical reservations is over. Things have to be called by their name to make it
possible for a co-ordinated democratic reaction to be initiated, above all in the public services.2
Liberalism was a doctrine derived from the philosophy of Enlightenment, at once political and
economic, which aimed at imposing on the state the necessary distance for ensuring respect for liberties
and the coming of democratic emancipation. It was the motor for the arrival, and the continuing progress,
of Western democracies.
Neoliberalism is a form of economism in our day that strikes at every moment at every sector of
our community. It is a form of extremism.
Fascism may be defined as the subordination of every part of the State to a totalitarian and nihilistic
ideology. I argue that neoliberalism is a species of fascism because the economy has brought under subjection
not only the government of democratic countries but also every aspect of our thought.1 The state is now at the disposal of the economy and of finance, which treat it as a subordinate
and lord over it to an extent that puts the common good in jeopardy.
The austerity that is demanded by the financial milieu has become a supreme value, replacing politics.
Saving money precludes pursuing any other public objective. It is reaching the point where claims
are being made that the principle of budgetary orthodoxy should be included in state constitutions.
A mockery is being made of the notion of public service.
The nihilism that results from this makes possible the dismissal of universalism and the most
evident humanistic values: solidarity, fraternity, integration and respect for all and for differences.
There is no place any more even for classical economic theory: work was formerly an element in
demand, and to that extent there was respect for workers; international finance has made of it a
mere adjustment variable.
Every totalitarianism starts as distortion of language, as in the novel by George Orwell. Neoliberalism
has its Newspeak and strategies of communication that enable it to deform reality. In this spirit,
every budgetary cut is represented as an instance of modernization of the sectors concerned. If some
of the most deprived are no longer reimbursed for medical expenses and so stop visiting the dentist,
this is modernization of social security in action!
Abstraction predominates in public discussion so as to occlude the implications for human beings.
Thus, in relation to migrants, it is imperative that the need for hosting them does not lead to
public appeals that our finances could not accommodate. Is it In the same way that other individuals
qualify for assistance out of considerations of national solidarity?
The cult of evaluation
Social Darwinism predominates, assigning the most stringent performance requirements to everyone
and everything: to be weak is to fail. The foundations of our culture are overturned: every humanist
premise is disqualified or demonetized because neoliberalism has the monopoly of rationality and
realism. Margaret Thatcher said it in 1985: "There is no alternative." Everything else is utopianism,
unreason and regression. The virtue of debate and conflicting perspectives are discredited because
history is ruled by necessity.
This subculture harbours an existential threat of its own: shortcomings of performance condemn
one to disappearance while at the same time everyone is charged with inefficiency and obliged to
justify everything. Trust is broken. Evaluation reigns, and with it the bureaucracy which imposes
definition and research of a plethora of targets, and indicators with which one must comply. Creativity
and the critical spirit are stifled by management. And everyone is beating his breast about the wastage
and inertia of which he is guilty.1
The neglect of justice
The neoliberal ideology generates a normativity that competes with the laws of parliament. The
democratic power of law is compromised. Given that they represent a concrete embodiment of liberty
and emancipation, and given the potential to prevent abuse that they impose, laws and procedures
have begun to look like obstacles.
The power of the judiciary, which has the ability to oppose the will of the ruling circles, must
also be checkmated. The Belgian judicial system is in any case underfunded. In 2015 it came last
in a European ranking that included all states located between the Atlantic and the Urals. In two
years the government has managed to take away the independence given to it under the Constitution
so that it can play the counterbalancing role citizens expect of it. The aim of this undertaking
is clearly that there should no longer be justice in Belgium.
A caste above the Many
But the dominant class doesn't prescribe for itself the same medicine it wants to see ordinary
citizens taking: well-ordered austerity begins with others. The economist Thomas Piketty has perfectly
described this in his study of inequality and capitalism in the twenty-first century (French edition,
In spite of the crisis of 2008 and the hand-wringing that followed, nothing was done to police
the financial community and submit them to the requirements of the common good. Who paid? Ordinary
people, you and me.
And while the Belgian State consented to 7 billion-euro ten-year tax breaks for multinationals,
ordinary litigants have seen surcharges imposed on access to justice (increased court fees, 21% taxation
on legal fees). From now on, to obtain redress the victims of injustice are going to have to be rich.
All this in a state where the number of public representatives breaks all international records.
In this particular area, no evaluation and no costs studies are reporting profit. One example: thirty
years after the introduction of the federal system, the provincial institutions survive. Nobody can
say what purpose they serve. Streamlining and the managerial ideology have conveniently stopped at
the gates of the political world.
The security ideal
Terrorism, this other nihilism that exposes our weakness in affirming our values, is likely to
aggravate the process by soon making it possible for all violations of our liberties, all violations
of our rights, to circumvent the powerless qualified judges, further reducing social protection for
the poor, who will be sacrificed to "the security ideal".
Salvation in commitment
These developments certainly threaten the foundations of our democracy, but do they condemn us
to discouragement and despair?
Certainly not. 500 years ago, at the height of the defeats that brought down most Italian states
with the imposition of foreign occupation for more than three centuries, Niccolo Machiavelli urged
virtuous men to defy fate and stand up against the adversity of the times, to prefer action and daring
to caution. The more tragic the situation, the more it necessitates action and the refusal to "give
up" (The Prince, Chapters XXV and XXVI).
This is a teaching that is clearly required today. The determination of citizens attached to the
radical of democratic values is an invaluable resource which has not yet revealed, at least in Belgium,
its driving potential and power to change what is presented as inevitable. Through social networking
and the power of the written word, everyone can now become involved, particularly when it comes to
public services, universities, the student world, the judiciary and the Bar, in bringing the common
good and social justice into the heart of public debate and the administration of the state and the
Neoliberalism is a species of fascism. It must be fought and humanism fully restored.4
Published in the Belgian daily Le Soir, 3.3.2016
translated from French by Wayne Hall
Le néolibéralisme est un fascisme, par Manuela Cadelli
"That empowerment must be both economic and political. Workers deserve to be compensated
fairly for their work, and have generous social support programs to rely upon when economic
changes that are out of their control throw them out of work or force them to accept lower paying
jobs. We should not hesitate to ask those who have gained so much from globalization and
technological change to give something back to those who have paid the costs of their success."
All this would have been especially great, say, forty or even thirty years ago.
"... As the world reels from the Brexit shock, it is dawning on economists and policymakers that they severely underestimated the political fragility of the current form of globalization. The popular revolt that appears to be underway is taking diverse, overlapping forms: reassertion of local and national identities, demand for greater democratic control and accountability, rejection of centrist political parties, and distrust of elites and experts. ..."
"... As an emerging new establishment consensus grudgingly concedes, globalization accentuates class divisions between those who have the skills and resources to take advantage of global markets and those who don't. Income and class cleavages, in contrast to identity cleavages based on race, ethnicity, or religion, have traditionally strengthened the political left. So why has the left been unable to mount a significant political challenge to globalization? ..."
"... Latin American democracies provide a telling contrast. These countries experienced globalization mostly as a trade and foreign-investment shock, rather than as an immigration shock. Globalization became synonymous with so-called Washington Consensus policies and financial opening. Immigration from the Middle East or Africa remained limited and had little political salience. So the populist backlash in Latin America – in Brazil, Bolivia, Ecuador, and, most disastrously, Venezuela – took a left-wing form. ..."
"... Economists and technocrats on the left bear a large part of the blame. Instead of contributing to such a program, they abdicated too easily to market fundamentalism and bought in to its central tenets. Worse still, they led the hyper-globalization movement at crucial junctures. ..."
"... The enthroning of free capital mobility – especially of the short-term kind – as a policy norm by the European Union, the Organization for Economic Cooperation and Development, and the IMF was arguably the most fateful decision for the global economy in recent decades. ..."
"... Similarly, in the US, it was technocrats associated with the more Keynesian Democratic Party, such as Lawrence Summers, who led the charge for financial deregulation. ..."
"... France's Socialist technocrats appear to have concluded from the failed Mitterrand experiment with Keynesianism in the early 1980s that domestic economic management was no longer possible, and that there was no real alternative to financial globalization. The best that could be done was to enact Europe-wide and global rules, instead of allowing powerful countries like Germany or the US to impose their own. ..."
"... The good news is that the intellectual vacuum on the left is being filled, and there is no longer any reason to believe in the tyranny of "no alternatives." Politicians on the left have less and less reason not to draw on "respectable" academic firepower in economics. ..."
"... Consider just a few examples: Anat Admati and Simon Johnson have advocated radical banking reforms; Thomas Piketty and Tony Atkinson have proposed a rich menu of policies to deal with inequality at the national level; Mariana Mazzucato and Ha-Joon Chang have written insightfully on how to deploy the public sector to foster inclusive innovation; Joseph Stiglitz and José Antonio Ocampo have proposed global reforms; Brad DeLong, Jeffrey Sachs, and Lawrence Summers (the very same!) have argued for long-term public investment in infrastructure and the green economy. There are enough elements here for building a programmatic economic response from the left. ..."
"... Economists have finally admitted that offshoring has resulted in the loss of American jobs. They no long mention that only a few years they claimed that offshoring created newer and higher paying American jobs. Isn't science wonderful. Middle and working class women went to work to maintain living standards, eventually the middle and working classes resorted to debt resulting in the Great Recession. ..."
"... In addition to economic instability and decline of the lower orders the federal government has sought to encourage immigration, H1-Bs, refugees and others. These people take jobs from Americans (economist dogma notwithstanding) or reduce American incomes if they are not on public assistance. ..."
"... Even Krugman has characterized America as a plutocracy. ..."
"... Yet the sudden success of Trump shows that many Americans are too angry to listen to plans for distant economic melioration or to tolerate cultural destabilization at the hands of government that no longer represents their interests, economic or cultural. Liberals can castigate them and dismiss their political judgment but it might help to spend some time trying to see the world from their perspective ..."
"... As they don't seem to fit into the equations and theories of the economists, both civic virtue and public trust have been assigned an economic value of zero and factored out of the "it's the ecomomy stupid" world view entirely. Or so it seems to me. ..."
"... "Who's rich?" is an easier question to answer than "who's trustworthy." ..."
"... The Washington consensus was pure Hayek. Summers was the purest of the pure on the Washington consensus. As Summers destroyed Yeltsin's good economic reform in 1993, Stiglitz was his chief adversary in government. Stiglitz wrote about how utterly ideological Summers was. And was under Obama. Now he is for the pittance of infrastructure Clinton wants in the hope she will name him Fed chief. ..."
"... The utter hysteria about Trump on the "left" is very illuminating . One judges a populist like Trump at one's peril. But the evidence strongly suggests that Hank Paulson and George Will--and others like them--understand Trump and Clinton quite well on domestic policy. She is the Republican--and as in 1964, a Goldwater Republican at that. He is on the left. The left does not want a left-wing policy. ..."
"... IS THERE THE MENTION OF THE WORD "LABOR UNION" IN THERE ANYWHERE -- ADMITTEDLY ONLY COMPLETELY MISSING IN THE US? ..."
"... When you have the US congress acting like a Roman senate but without a Ceasar, legislating left and right as if they are the supremos on the world stage and destroying anything and everything in their path and other world leaders following the orders of their masters in the US without questioning or even a say, how can one expect anything to work. ..."
[T]he experience in Latin America and southern Europe reveals perhaps a greater weakness of
the left: the absence of a clear program to refashion capitalism and globalization for the twenty-first
century. From Greece's Syriza to Brazil's Workers' Party, the left has failed to come up with
ideas that are economically sound and politically popular, beyond ameliorative policies such as
Economists and technocrats on the left bear a large part of the blame. Instead of contributing
to such a program, they abdicated too easily to market fundamentalism and bought in to its central
tenets. Worse still, they led the hyper-globalization movement at crucial junctures.
As the world reels from the Brexit shock, it is dawning on economists and policymakers that
they severely underestimated the political fragility of the current form of globalization. The popular
revolt that appears to be underway is taking diverse, overlapping forms: reassertion of local and
national identities, demand for greater democratic control and accountability, rejection of centrist
political parties, and distrust of elites and experts.
This backlash was predictable. Some economists, including me, did warn about the consequences of
pushing economic globalization beyond the boundaries of institutions that regulate, stabilize, and
legitimize markets. Hyper-globalization in trade and finance, intended to create seamlessly integrated
world markets, tore domestic societies apart.
The bigger surprise is the decidedly right-wing tilt the political reaction has taken. In Europe,
it is predominantly nationalists and nativist populists that have risen to prominence, with the left
advancing only in a few places such as Greece and Spain. In the United States, the right-wing demagogue
Donald Trump has managed to displace the Republican establishment, while the leftist Bernie Sanders
was unable to overtake the centrist Hillary Clinton.
As an emerging new establishment consensus grudgingly concedes, globalization accentuates
class divisions between those who have the skills and resources to take advantage of global markets
and those who don't. Income and class cleavages, in contrast to identity cleavages based on race,
ethnicity, or religion, have traditionally strengthened the political left. So why has the left been
unable to mount a significant political challenge to globalization?
One answer is that immigration has overshadowed other globalization "shocks." The perceived threat
of mass inflows of migrants and refugees from poor countries with very different cultural traditions
aggravates identity cleavages that far-right politicians are exceptionally well placed to exploit.
So it is not a surprise that rightist politicians from Trump to Marine Le Pen lace their message
of national reassertion with a rich dose of anti-Muslim symbolism.
Latin American democracies provide a telling contrast. These countries experienced globalization
mostly as a trade and foreign-investment shock, rather than as an immigration shock. Globalization
became synonymous with so-called Washington Consensus policies and financial opening. Immigration
from the Middle East or Africa remained limited and had little political salience. So the populist
backlash in Latin America – in Brazil, Bolivia, Ecuador, and, most disastrously, Venezuela – took
a left-wing form.
The story is similar in the main two exceptions to right-wing resurgence in Europe – Greece and
Spain. In Greece, the main political fault line has been austerity policies imposed by European institutions
and the International Monetary Fund. In Spain, most immigrants until recently came from culturally
similar Latin American countries. In both countries, the far right lacked the breeding ground it
But the experience in Latin America and southern Europe reveals perhaps a greater weakness of
the left: the absence of a clear program to refashion capitalism and globalization for the twenty-first
century. From Greece's Syriza to Brazil's Workers' Party, the left has failed to come up with ideas
that are economically sound and politically popular, beyond ameliorative policies such as income
Economists and technocrats on the left bear a large part of the blame. Instead of contributing
to such a program, they abdicated too easily to market fundamentalism and bought in to its central
tenets. Worse still, they led the hyper-globalization movement at crucial junctures.
The enthroning of free capital mobility – especially of the short-term kind – as a policy
norm by the European Union, the Organization for Economic Cooperation and Development, and the IMF
was arguably the most fateful decision for the global economy in recent decades. As Harvard
Business School professor Rawi Abdelal has shown, this effort was spearheaded in the late 1980s and
early 1990s not by free-market ideologues, but by French technocrats such as Jacques Delors (at the
European Commission) and Henri Chavranski (at the OECD), who were closely associated with the Socialist
Party in France. Similarly, in the US, it was technocrats associated with the more Keynesian
Democratic Party, such as Lawrence Summers, who led the charge for financial deregulation.
France's Socialist technocrats appear to have concluded from the failed Mitterrand experiment
with Keynesianism in the early 1980s that domestic economic management was no longer possible, and
that there was no real alternative to financial globalization. The best that could be done was to
enact Europe-wide and global rules, instead of allowing powerful countries like Germany or the US
to impose their own.
The good news is that the intellectual vacuum on the left is being filled, and there is no
longer any reason to believe in the tyranny of "no alternatives." Politicians on the left have less
and less reason not to draw on "respectable" academic firepower in economics.
Consider just a few examples: Anat Admati and Simon Johnson have advocated radical banking
reforms; Thomas Piketty and Tony Atkinson have proposed a rich menu of policies to deal with inequality
at the national level; Mariana Mazzucato and Ha-Joon Chang have written insightfully on how to deploy
the public sector to foster inclusive innovation; Joseph Stiglitz and José Antonio Ocampo have proposed
global reforms; Brad DeLong, Jeffrey Sachs, and Lawrence Summers (the very same!) have argued for
long-term public investment in infrastructure and the green economy. There are enough elements here
for building a programmatic economic response from the left.
A crucial difference between the right and the left is that the right thrives on deepening divisions
in society – "us" versus "them" – while the left, when successful, overcomes these cleavages through
reforms that bridge them. Hence the paradox that earlier waves of reforms from the left – Keynesianism,
social democracy, the welfare state – both saved capitalism from itself and effectively rendered
themselves superfluous. Absent such a response again, the field will be left wide open for populists
and far-right groups, who will lead the world – as they always have – to deeper division and more
Dani Rodrik is Professor of International Political Economy at Harvard University's John F. Kennedy School of Government. He is the author of The Globalization Paradox: Democracy and the Future of the World Economy and, most recently, Economics Rules: The Rights and Wrongs of the Dismal Science.
Tom Shillock JUL 12, 2016
The distribution of a society's benefits and burdens at any point in time is zero sum. Over
the past four decades financial deregulation, tax laws and numerous federal government
policies transferred the bulk of the gains from GDP to the upper class while causing numerous
financial crises (100+ according to Martin Wolf, The Shifts and The Shocks). Economists
have finally admitted that offshoring has resulted in the loss of American jobs. They no long
mention that only a few years they claimed that offshoring created newer and higher paying
American jobs. Isn't science wonderful. Middle and working class women went to work to
maintain living standards, eventually the middle and working classes resorted to debt
resulting in the Great Recession.
In addition to economic instability and decline of the lower orders the federal government
has sought to encourage immigration, H1-Bs, refugees and others. These people take jobs from
Americans (economist dogma notwithstanding) or reduce American incomes if they are not on
public assistance. The effects are working their way up the 'skill' level. This at a time
when middle and working class Americans lack universal health care, are being priced out of
higher education, lack job security, lack decent unemployment benefits and have one of the
worst social safety net in the OECD.
Self-styled American "liberals" don't seem to distinguish between the legitimate claims of
their fellow citizens and the sympathy or empathy for foreigners. Surely, citizens, especially
the middle and working classes, should have first claim to the country's resources; not the
rich and not foreigners. Citizens of a country also have a right to their culture, to not have
their taxes pay to suddenly impose large numbers of people from foreign cultures on them. Is
it an wonder that many Americans feel abandoned by their government?
America has never been a "melting pot" (Cf. Beyond the Melting Pot by Nathan Glazer and Daniel
Patrick Moynihan). Should it surprise that "liberals" provoke a backlash by trying to impose
their utopian idea of American society on Americans who have seen their economic prospects
decline for four decades with little prospect of improvement? Even Krugman has
characterized America as a plutocracy. Piketty argues that inequality will increase
absent countervailing policies. Yet the sudden success of Trump shows that many Americans
are too angry to listen to plans for distant economic melioration or to tolerate cultural
destabilization at the hands of government that no longer represents their interests, economic
or cultural. Liberals can castigate them and dismiss their political judgment but it might
help to spend some time trying to see the world from their perspective
Denis Drew JUL 12, 2016
" Consider just a few examples: Anat Admati and Simon Johnson have advocated radical
banking reforms; Thomas Piketty and Tony Atkinson have proposed a rich menu of policies to
deal with inequality at the national level; Mariana Mazzucato and Ha-Joon Chang have written
insightfully on how to deploy the public sector to foster inclusive innovation; Joseph
Stiglitz and José Antonio Ocampo have proposed global reforms; Brad DeLong, Jeffrey Sachs, and
Lawrence Summers (the very same!) have argued for long-term public investment in
infrastructure and the green economy. There are enough elements here for building a
programmatic economic response from the left. "
J. Bradford DeLong JUL 12, 2016
As always, when the extremely sharp Dani Rodrick stuffs a book-length argument into an
800-word op-ed column, phrases acti as gestures toward what are properly chapter-long
arguments. So there is lots to talk about...
Curtis Carpenter Jun 11, 2016
I wonder though if the hegemony of the economic perspective in modern society hasn't played
a vital role in both the abdication of the left AND the corruption of the right?
As they don't seem to fit into the equations and theories of the economists, both civic
virtue and public trust have been assigned an economic value of zero and factored out of the
"it's the ecomomy stupid" world view entirely. Or so it seems to me.
"Who's rich?" is an easier question to answer than "who's trustworthy."
Perhaps it isn't that "economic globalizations" has been pushed too far, but that the
reduction of all human values to economic terms has.
Jerry F. Hough Jun 11, 2016
I have long followed Dani's work and agreed with his general analysis. He has an unusual
knowledge of developing country politics, especially in Turkey and the Middle East
As a person involved for 55 years--really 60 years- in Soviet-American relations and policy
politics or now for the last 15 years research and teaching on American political history and
presidential politics, I would like to add a few points.
First, there are very few left-wingers on the left-wing. Free trade is Hayek applied to the
international sphere where there is no government at all and, except for some bankers and the
like, not even the common norms that Hayek substituted for government.
The Washington consensus was pure Hayek. Summers was the purest of the pure on the
Washington consensus. As Summers destroyed Yeltsin's good economic reform in 1993, Stiglitz
was his chief adversary in government. Stiglitz wrote about how utterly ideological Summers
was. And was under Obama. Now he is for the pittance of infrastructure Clinton wants in the
hope she will name him Fed chief.
Second, as we in Soviet studies understood, the left and right meet at the extremes and are
not that different. Nazi was appropriately named. Hitler was National Socialist -- truly awful
on the Nationalist side, but also quite socialist in domestic economic policy. Mussolini began
as a Communist.
The New Left and Goldwater right of the 1960s had a very different set of views from the
nationalistic socialists, but they were alike in being very, very similar in their libertarian
views. Russell KIrk and Gordon Tullock were right in calling them anarchisti.
The utter hysteria about Trump on the "left" is very illuminating . One judges a
populist like Trump at one's peril. But the evidence strongly suggests that Hank Paulson and
George Will--and others like them--understand Trump and Clinton quite well on domestic policy.
She is the Republican--and as in 1964, a Goldwater Republican at that. He is on the left. The
left does not want a left-wing policy.
In foreign policy the evidence is even stronger that Trump would transform American foreign
policy in the Middle East. Just as Nixon attacked "Communism" to reconcile with the Soviet
Union and, as his chief adviser on the Soviet Union says, Reagan had a military buildup to
prepare the public to accept real peace with the Soviet Union (and Obama had pro-Muslim
rhetoric to hide the giving of all power to Cheney's man Brenner and the killing of Muslims),
Trump's anti Muslim talk is almost surely a set-up for an anti-Netanyahu policy. The utter,
utter, utter hysteria of the Netanyahu lobby shows they understand.
But the American "left-wing" is the New Left of the 1960s. It rejected the Old Left and a
positive role for government. It was as libertarian in economics as in cultural life. Summers,
who was 18 years old in the 1972 of McGovern is the epitome. (Krugman was 19). Bill Clinton,
who conducted the libertarian revolution of 1992 was 26 in 1972.
This generation is passing. Trump, born in 1946, unfortunately, was raised in the
confrontational atmosphere and retains its spirit. but at least he was in business and not
part of the politics of the street. By the 2020s the millennials of the 1980s who came of age
from 2000 to 2015 will be in power for three decades and have a very different set of
Let us just hope the West survives until then. Read less
IS THERE THE MENTION OF THE WORD "LABOR UNION" IN THERE ANYWHERE -- ADMITTEDLY ONLY
COMPLETELY MISSING IN THE US?
As long as nobody else talks about re-unionization (as the beginning and the end of
re-constituting the American dream) - nobody thinks it is possible to talk about …
… or something.
Easy as pie to make union busting a felony in our most progressive states f(WA, OR, CA, NV,
IL, NY, MD) - and then get out of the way as the first 2000 people in the many telephone
directories re-define our future.
Do this or do nothing.
M M Jun 11, 2016
Dani, one should stop blaming migration (which is totally different from the refugees
influx) and the right, centre and left parties. Based on the latest UK and US events, it very
clear to the wise that none of these factors is a cause of the rise in nationalism or the
discontent by the population. When you have the US congress acting like a Roman senate but
without a Ceasar, legislating left and right as if they are the supremos on the world stage
and destroying anything and everything in their path and other world leaders following the
orders of their masters in the US without questioning or even a say, how can one expect
anything to work.
Enough of the passing of the buck and of blaming the abstract. All problems started since
this US administration came to office and due to its weakness or concealed collusion in
resolving the important issues affecting the US and the world economies.
"... Jihad vs. McWorld ..."
the wake of the June 23 Brexit vote, global media have bristled with headlines
declaring the Leave victory to be the latest sign of a historic
rejection of "globalization"
by working-class voters on both sides of the
Atlantic. While there is an element of truth in this analysis, it misses the
deeper historical currents coursing beneath the dramatic headlines. If our
politics seem disordered at the moment, the blame lies not with globalization
alone but with the "There Is No Alternative" (TINA) philosophy of neoliberal
market inevitability that has driven it for nearly four decades.
British Prime Minister Margaret Thatcher introduced the TINA
acronym to the world in a 1980 policy speech that proclaimed
"There Is No Alternative"
to a global neoliberal capitalist order.
Thatcher's vision for this new order was predicated on the market-as-god
she had distilled
from the work of
economists such as Friedrich Hayek and her own
fundamentalist Christian worldview. Western political life today has devolved
into a series of increasingly desperate and inchoate reactions against a sense
of fatal historical entrapment originally encoded in Thatcher's TINA credo of
capitalist inevitability. If this historical undercurrent is ignored, populist
revolt will not produce much-needed democratic reform. It will instead be
exploited by fascistic nationalist demagogues and turned into a dangerous
search for political scapegoats.
The Rebellion Against Inevitability
Thatcher's formulation of neoliberal inevitability manifested
itself in a de facto policy cocktail of public sector budget cuts,
privatization, financial deregulation, tax cuts for the rich, globalization of
capital flows and militarization that were the hallmarks of her administration
template for the future
of the world's developed economies. After the 1991
collapse of the Soviet Union, whose coercive state socialism represented
capitalism's last great power alternative, the underlying philosophy of
economic inevitability that informed TINA seemed like a prescient divination of
cosmic design, with
giddy neoconservatives declaring the "end of history"
and the triumph of
putatively democratic capitalism over all other historical alternatives.
Nearly four decades later, with neoliberalism having swept the
globe in triumph through a mix of technological innovation, exploitative
financial engineering and brute force, eclipsing its tenuous democratic
underpinnings in the process, disgraced British Prime Minister David Cameron
maintained his devotion to TINA right up to the moment of Brexit. In a 2013
speech delivered as his government was preparing a
budget that proposed 40 percent cuts in social welfare spending
privatization, wider war in Central Asia and continued austerity, he lamented
that "If there was another way, I would take it.
there is no alternative."
Although they may want a change of makeup or
clothes, every G7 head of state heeds TINA's siren song of market
As the de facto test subjects for the inexorable media-fueled
march of this ubiquitous global model, disparate groups worldwide have become
the unwitting faces of revolt against inevitability. Anonymized behind the
august facades of global financial institutions, neoliberal capitalism under
TINA has produced political rage, confusion, panic and a worldwide search for
scapegoats and alternatives across the political spectrum.
The members of ISIS have rejected the highest ideals of Islam in
their search for an alternative. Environmental activists attempt to counter the
end-of-history narrative at the heart of TINA with the scientific inevitability
of global climate-induced ecological catastrophe. Donald Trump offers a racial
or foreign scapegoat for every social and economic malady created by TINA, much
like the far-right nationalist parties emerging across Europe, while Bernie
Sanders focuses on billionaires and Wall Street. Leftist movements such as
Podemos in Spain or Syriza in Greece also embody attempted declarations of
revolt against the narrative of inevitability, as do the angry votes for Brexit
in England and Wales.
Without judging or implying equality in the value of these varied
expressions of resistance, except to denounce the murderous ethos of ISIS and
any other call to violence or racism, it is clear that each offers seeming
alternatives to TINA's suffocating inevitability, and each attracts its own
"Jihad" vs. "McWorld" and the New Theology of Capital
Benjamin Barber's 1992 essay and subsequent book,
, is a better guide to the current politics of rage than the daily
news media. Barber describes a historic post-Soviet clash between the identity
politics of tribalism ("Jihad") and the forced financial and cultural
integration of corporate globalism ("McWorld").
McWorld is the financially integrated and omnipresent
transnational order of wired capitalism that has anointed itself the historic
guardian of Western civilization. It is viciously undemocratic in its pursuit
of unrestricted profits and violently punitive in response to any hint of
economic apostasy. (See
.) This new economic order offers the illusion of modernity with its
globally wired infrastructure and endless stream of consumerist spectacles, but
beneath the high-tech sheen, it is
, predicated on
destroying the biosphere
McWorld cuts its destructive path under a self-promoting
presumption of historic inevitability, because after more than four decades of
the TINA narrative, the underlying rationale of market predestination is no
longer economic. It is theological. A historic transformation of market-based
economic ideology into theology underpins modern capitalism's instrumentalized
view of human nature and nature itself.
Descriptions such as
and "market orthodoxy" are not mere figures of
speech. They point to a deeper, technologically powered religious metamorphosis
of capitalism that needs to be understood before a meaningful political
response can be mounted. One does not have to be Christian, nor Catholic, to
Pope Francis' warnings
against the danger to Christian values from "a
deified market" with its "globalization of indifference." The pope is
explicitly acknowledging a new theology of capital whose core ethos runs
counter to the values of both classical and religious humanism.
Under the radically altered metaphysics of theologized capitalism,
market outcomes are sacred and inevitable. Conversely, humanity and the natural
world have been desacralized and defined as malleable forms of expendable and
theoretically inexhaustible capital. Even life-sustaining ecosystems and
individual human subjectivity are subsumed under a market rubric touted as
This is a crucial difference between capitalism today and
capitalism even 50 years ago that is not only theological but apocalyptic in
its refusal to acknowledge limits. It has produced a global, social and
economic order that is increasingly feudal, while also connected via digital
Karl Polanyi warned in 1944
that a false utopian belief in the ability of
unfettered markets to produce naturally balanced outcomes would produce instead
a dystopian "stark utopia." Today's political chaos represents a spontaneous
and uncoordinated eruption of resistance against this encroaching sense of
inevitable dystopianism. As Barber noted, what he refers to as "Jihad" is not a
strictly Islamic phenomenon. It is localism, tribalism, particularism or
sometimes classical republicanism taking a stand, often violently, acting as de
facto social and political antibodies against the viral contagions of McWorld.
The historically ordained march of theologized neoliberal capitalism depends
for its continuation on a belief by individuals that they are powerless against
putatively inevitable forces of market-driven globalization. It is too early to
know where the widely divergent outbreaks of resistance on display in 2016 will
lead, not least because they are uncoordinated, often self-contradictory or
profoundly undemocratic, and are arising in a maelstrom of confusion about core
One lesson nonetheless seems clear. The
"power of the powerless"
has been awakened globally. Whether this awakening
will spark a movement towards equitable, ecologically sustainable democratic
self-governance is an open question. Many of today's leading political
theorists caution against an
outdated Enlightenment belief in progress
and extol the
virtues of philosophic pessimism
as a hedge against historically groundless
optimism. Amid today's fevered populist excitements triggered by a failure of
utopian faith in market inevitability, such cautionary thinking seems like
sound political advice.
Copyright, Truthout. May not be reprinted without
Michael Meurer is the founder of Meurer Education, a project offering
classes on the US political system in Latin American universities while
partnering with local education micro-projects to assist them with
publicity and funding. Michael is also president of Meurer Group &
Associates, a strategic consultancy with offices in Los Angeles and
Neoliberalism as Social Necrophilia: The Case of Greece
By Panayota Gounari,
Neoliberal Roots of the Far Right's Ascendance in France
By Pierre Guerlain,
Neoliberal Economists: Against Bernie Sanders and Common Sense
By Jack Rasmus,
07/04/2016 at 1:26 pm
Sorry if it's a repost but here are a few good recent links
And this article. Interesting point that Saudi Arabia will have a dilemma when they attempt
to represent the interests of future shareholders in Saudi Aramco as well as be a cartel member
and cooperate with OPEC interests.
"... The developed proved and probable is 655 Gb, which would equate to about 4.5% natural decay rate. ..."
George Kaplan ,
07/04/2016 at 1:25 pm
New estimate for reserves and resources from Rystad:
The developed proved and probable is 655 Gb, which would equate to about 4.5% natural decay
There is supposed to be about 900 Gb undiscovered, which at last years rates would take about
300 years to find (and my guess is that if there is that much hydrocarbon it has a significant
amount of gas).
And there are 500 Gb discovered and undeveloped, I don't follow that much but there is a country
break down to check out, but the IOCs stopped development with prices at $110 per barrel so it's
probably going to cost more than $8 trillion to put that much on line.
"... So he's covered. I'm about to publish something here maybe today and the sub title of this section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long as the investor presentation or the news release says somewhere that we're using language here that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud because we told you it was a lie. ..."
"... Well we started this conversation with your important observation that we're only talking about a million or million and a half barrels a day of oversupply. So we could go from over supply to deficit pretty quickly ..."
"... So just the capital cuts in US companies have effectively deferred $20 billion-or maybe the world, I'm sorry-$20 billion barrels of development of known proven reserves. ..."
"... Well there's a big lag. There's a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they've been asleep at the wheel for how many months or years. You don't just turn a valve and all of a sudden everything is okay again. ..."
"... There's this tremendous gap between "okay we know there's a reserve," but what's it take to turn it into supply? Well it takes time and it takes money and it doesn't happen overnight. ..."
"... EIA says average price in 2016 will be $53 a barrel. They're not always right and in fact they're often wrong but they're not stupid either. They're doing the best they can. They have got some good people there. ..."
"... Well just turn the clock back to 2012-2013 when oil prices were sky high, were $100 a barrel or more, and what we saw was consistent negative cash flow from virtually all of the major players. So what that says is they weren't making money when oil prices were high, so is it a big shock that they're hemorrhaging when oil prices are lower? So oil prices go back up-the bottom line Chris is the only way that they were able to stay looking fairly good back then to somebody, not me, was that people were giving them money. They had infinite access to capital at almost no cost, and so they were spending it. But their income statements and balance sheets look like crap and the investment community I guess was willing to look past that or didn't want to look at it or whatever. ..."
Chris Martenson: ... And still when I look at the operators in those plays they're claiming that they're going to get
twice that, sometimes even more than twice that out of each well. When I've calculated the economics
in that play myself-I got a little spreadsheet, I did my level best. And then I found that you had
calculated what's going on in that play as well. So let's cut right to that. In the Bakken, how many
wells that get drilled out here right now would be economic in today's prices?
Almost none at today's prices. The latest from the North Dakota Department of Mineral Resources
says that wellhead prices are in the 20's so… I published a report not very long ago that said that
1% of the Bakken was breaking even at $30 oil prices. So now we're below that and I don't remember
exactly what percentage of wells but it was something like maybe 5 or 6%. But so right now let's
face it Chris, let's just get it right out there in the open: Everybody is losing their ass at current
oil prices. I don't care what they say. I'm in this business, okay? I just drilled two discoveries
in the last month or two at the bottom of the cycle and we can make a weak profit off of what we
found-first of all they're conventional reservoirs so they didn't cost us $6-$10 million to drill.
And we don't have to drill them horizontally. We don't have to frack them. And we have got no overhead
and we have got no debt; so that puts us in kind of a really different situation for most public
The truth is that everybody-the best positions in the best plays in the United States, the core
of the core, if you will-nobody can break even at less than about $45 a barrel and that's just reality.
That's not sticking them with their land costs that they sunk and wrote off long ago; that's just
basic operating expenses and severance taxes and stuff that I publish in all of my reports and nobody
ever argues with me about that. They may disagree with a lot of my conclusions or etc. but they never
say "Oh no, your economic assumptions were way off base." No they're not off base.
So take that to the bank and let's just get that whole silly conversation off the table. Everybody
is losing their ass at $20 or $30 oil, everybody. And that includes Saudi Arabia, Kuwait and everybody
in the world is. But certainly US producers, very best of the best, they got to have $45 or $50,
and that's a small subset of their wells in a play. And realistically $60-$65 is bare bones for the
average well positioned company, all of their better wells or current wells in play. That's just
the way it works. And if you hear something else, ask a lot of questions, like: "Tell me what costs
you're excluding," because that's the only way to get there is just be excluding costs.
... When I look at it that way, just sort of high level, I'm looking at 10 billion barrels, what are the reserves? Total reserves? Across all the plays that these operators are in? It can't be a whole heck of a lot more than that, can it?
Proven reserves in the United States as of EIA's latest report a couple weeks ago are 40 billion barrels of oil. Now there is a Proven Undeveloped which is another category that is also proven, which you can add another 40 or 50% but the number you're talking about there is a huge proportion of the total United States' proven reserves, any way you cut it. And so yeah, be scared. That's the message.
... ... ...
There is no difference between what EIA is saying and the companies are
saying, okay? So there's two realities here. There is the reality of truth, like go to jail
truth-that's what the companies actually report in their quarterly and annual filings to the
Securities and Exchange Commission. That's where EIA gets its data. That's where EIA's proven
reserves come from; so there's that reality and that truth, and I think it's reasonably close to
the truth. And then there's what companies tell investors, who believe almost anything and don't
understand-again like Yergin's lifting cost. They don't understand, nor should they be required to
understand that he's not actually talking about total cost. He's talking about a subset of costs.
So your question: The proven reserves of the Bakken, according to the latest EIA, which comes from
companies, is 6 billion barrels. The Eagle Ford is a little more than 5, and the Permian is about
700 million. You add up all the rest of them, the Niobrara and the whatever, the Mississippi Lime
and you name it, and the total is about 13.5 billion barrels. That's the truth. And there's
probably an almost – there's a slightly smaller but large proven undeveloped reserve category as
Art I was just reading an investor presentation where one company
claimed to have access to almost that same number just in the Spraberry play.
Well yeah, Pioneer Natural Resources, that truthfully is not a bad company,
if you just look at their financials. But their CEO, Scott Sheffield, has been making just
absolutely preposterous claims for several years now about this Spraberry resource that they have
out in the Permian Basin. The Spraberry was discovered in 1946 for God's sake. In the industry, we
talk about and have talked about the Spraberry as being the largest non-commercial field in the
world. And we've talked about that for 50 years because nobody can figure out how to make money
off of that deal. So Sheffield says that they've got 10 billion barrels in the Spraberry. But
listen to his words; what is he really saying? He's got himself protected. He says that they've
got 10 billion net recoverable, resource potential. That's not a reserve.
Okay so what is a resource? Well a resource-and I'm going to the Society of Petroleum Engineers
here. The definition is a known and yet-to-be-discovered accumulation. It's vapor. We kind of know
it's there but we haven't found it yet. And so that's a resource, and now he's talking about a
resource potential. So it's not even a resource; it's a potential resource. So what he's saying is
that it's some vague number that we kind of think may be out there. And of course a resource has
nothing whatever to do with price. It's absolutely not – it doesn't have anything – it's any
price. It just says it's technically recoverable. So it means nothing, zero, zip. It means
So he's covered. I'm about to publish something here maybe today and the sub title of this
section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long
as the investor presentation or the news release says somewhere that we're using language here
that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need
to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud
because we told you it was a lie.
... ... ...
Well yes with over
200 trillion dollars of debt
outstanding of course you
have to service that debt and
high oil prices just don't
help that. The model I've
been working with for a long
time is there's a price of
oil at which the world
economy chokes and there's a
floor at which the energy
company's don't want to
pursue oil anymore and that
ceiling and that floor have
been coming closer and closer
together. So here we are,
we're clearly at a price
below which oil and natural
gas-in America here, I'm
staring at natural gas at
$1.83 is the quote I've got
on my screen right now,
yikes. That's way below the
all-in costs for most
companies that I've been
But let's dial
this back a bit. Globally
we've see this astonishing
pull back in CAPEX spending
by the oil majors, by the
mids, the minors, national
oil companies, all of
them-over a trillion dollars,
by a bunch of estimates. Talk
to us about what's the impact
on future oil supplies with
this just absolute
destruction of CAPEX spending
profound and extreme
[laughter]. We've got to be
several million barrels of
oil per day to make up for
our consumption. It's easy to
get confused and to say well
geez, we've got such an
oversupply right now, we
don't have to worry about
Well we started
this conversation with your
important observation that
we're only talking about a
million or million and a half
barrels a day of oversupply.
So we could go from over
supply to deficit pretty
not investing in finding that
additional couple of million
barrels a day that we need to
be discovering. So we're
deferring major, major
investments and we're not
just deferring exploration,
we're deferring development
of proven reserves.
just the capital cuts in US
companies have effectively
deferred $20 billion-or maybe
the world, I'm sorry-$20
billion barrels of
development of known proven
And so if we get to a
point- and we will, we almost
certainly will-where suddenly
everybody wakes up and says
"Oh my God we don't have
enough oil." We're now half a
million barrels a day low,
and what happens? The price
shoots up, okay? That's the
way commodity markets work.
And everybody says "Whoopee,
let's get back to drilling
Well there's a
big lag. There's a huge time
lag between when the price
responds and people actually
get around to drilling and
they actually start bringing
the oil onto the market and
it becomes available as
supply, because they've been
asleep at the wheel for how
many months or years. You
don't just turn a valve and
all of a sudden everything is
We saw this during the
Libyan Civil War. Saudi
Arabia said "Don't worry
guys, we've got all this
spare capacity. We'll just
turn it on and produce it and
the world won't see a
shortage." It never happened
because they had to actually
drill wells. Their spare
capacity means they have got
to drill wells to produce it
and that takes time. They
have got to drill it, they
have to test it, they have to
build pipelines, and by the
time they actually got any of
that work done, the Libyan
conflict was over. We've now
seen low production because
the Civil War continues, but
that's another story.
tremendous gap between "okay
we know there's a reserve,"
but what's it take to turn it
into supply? Well it takes
time and it takes money and
it doesn't happen overnight.
Well no and as you
mentioned it hasn't just been
the exploration but the more
pedestrian stuff like infill
drilling-that's pretty much
come to a complete halt in
the North Sea as far as I can
tell. And it looks like
Mexico is not doing a lot
with their investment down in
their plays at this point in
time, and Brazil doesn't even
begin to know how to get
started with their whole
Petrobras scandal and
drilling through those
really, really expensive deep
water finds they've got. Just
don't make any sense at this
price. So when I look across
really where the oil supply
growth is coming from, Art,
I'm pretty much-like it's
really down to the Middle
East and this hope that the
United States could rapidly
ramp up its shale "miracle"
if prices spike back up.
But I'm with you. I think
that as much as people are
focused on the oversupply
right now-and in two or three
years I'll be really
surprised, unless the world
economy crashes and demand
goes down, with that caveat
attached-I think the world
will be equally surprised by
the shortages that are
coming, because you can't
just… Here's what I see: I
look at this chart and I talk
about this in talks and I say
"Hey look from 2005 to 2012
the world spent about three
trillion dollars on upstream
oil and gas exploration and
production and basically got
the same amount of crude and
condensate out of ground for
its trouble," right? We
doubled our investment on a
yearly basis from $300 to
$600 billion and basically
held production flat. I can
only imagine what happens to
production once you take a
trillion in spend off of the
top of that.
Obviously it looks like to
me we're going to be facing a
multi-million barrel a day
shortfall, as long as things
don't fall apart on the world
And I think even if
things do fall apart on the
world economy stage. I
haven't done this, because
the records aren't there, but
you go back to a period like
the Great Depression in the
world and it's not as if
people stopped buying and
selling goods or transporting
themselves or materials. It
was a big – it was a
depression, and there were a
lot of people out of work,
but the world moves along and
consumption of oil and
natural gas isn't going to go
to zero. I think the forecast
that we've just recently seen
from the International Energy
Agency just last week,
they're saying "okay so
demand is probably going to
be down from 1.8 million
barrels a day of growth to
1.2 million barrels a day of
growth," and that's awful.
But wait a minute, 1.2
million barrels a day of
growth is – you're still
growing at a fairly high
rate. So you have got to be
replenishing your supply or
else you reach this zero
point where you're in deep
So I'm with you Chris.
Even in my darkest view of
where the economy could go, I
find myself on a very
different page than most of
the forecasters who think
that we're in for a decade or
decades of low oil prices. I
think we're going to be
struggling under the yolk of
much higher oil prices,
probably beginning next year.
I'm not a price forecaster
but it's hard for me to see-I
am a supply/demand kind of
guy and I would be very
surprised if by this time
next year we're not seeing
oil prices moving toward
something like $60 a barrel.
And you look at the forecast-
says average price in 2016
will be $53 a barrel. They're
not always right and in fact
they're often wrong but
they're not stupid either.
They're doing the best they
can. They have got some good
So I think
this notion that we're
somehow stuck in $30 or $40
oil forever and ever, it just
doesn't square with the
Well it would mean
that we're anticipating that
oil is going to stay below
its marginal cost of
production for a very long
time. It's very difficult for
any commodity to stay there
for long but oil in
particular because of its
stock versus flows. Yes
there's 3 billion barrels
above ground right now but
hey, that's only so many days
of consumption if you decided
to stop producing. So yes,
I'm with you. I think that
obviously oil has to go up in
price at some point and
that's even exclusive of any
geopolitical accidents that
might happen in the Middle
East; just simple
supply/demand and all of
If oil does go back up,
last question, you study the
companies that are involved
in this very carefully and I
think a lot of investors,
especially the banks who have
put the lines of credit out
there, are really double
fingers crossed hoping that
the price of oil moves back
up and all these problems
that these companies are
facing economically will sort
of be in the rear view
mirror. Would you share that
view or do you think that
even if oil rebounds there's
a number of companies here
that have gotten themselves
in over their heads with
respect to debt versus
Well just turn the
clock back to 2012-2013 when
oil prices were sky high,
were $100 a barrel or more,
and what we saw was
consistent negative cash flow
from virtually all of the
major players. So what that
says is they weren't making
money when oil prices were
high, so is it a big shock
that they're hemorrhaging
when oil prices are lower? So
oil prices go back up-the
bottom line Chris is the only
way that they were able to
stay looking fairly good back
then to somebody, not me, was
that people were giving them
money. They had infinite
access to capital at almost
no cost, and so they were
spending it. But their income
statements and balance sheets
look like crap and the
investment community I guess
was willing to look past that
or didn't want to look at it
So rearview mirror? No,
these are companies that are
highly leveraged and unless
and until that changes-maybe
that's one of the positive
outcomes of this. Maybe we
see a turnover of players.
There are better companies
whose balance sheets look
better and they're the ones
who can afford to say "Okay,
we're going to slow down
production right now because
we don't have the same debt
service that the guy next
door does." So my hope is
that like all crises this is
going to flush out a lot of
the bad players, or at least
some of them. But will higher
oil prices solve the problem
and save the day for the
people that hold the debt?
No. It won't hurt, but if
they couldn't make a profit
at higher prices, going back
to higher prices doesn't fix
So for many of these
investors and players, in
many cases, the best that
they can hope for if oil
prices rise is a higher
recovery of cents on the
dollar, but they're probably
not going to get back to
whole on this?
No. Unless somebody
is willing to forgive debt.
If we get that bad, then
there's the solution of last
"... the US has been successful in dictating neoliberal policies, acting partly through the IMF and World Bank and partly through direct pressure. ..."
"... From roughly the mid 1930s to the mid 1970s a new "interventionist" approach replaced classical liberalism, and it became the accepted belief that capitalism requires significant state regulation in order to be viable. In the 1970s the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then in the realm of public policy. ..."
"... Neoliberal theory claims that a largely unregulated capitalist system (a "free market economy" not only embodies the ideal of free individual choice but also achieves optimum economic performance with respect to efficiency, economic growth, technical progress, and distributional justice. ..."
"... The policy recommendations of neoliberalism are concerned mainly with dismantling what remains of the regulationist welfare state. ..."
"... This paper argues that the resurgence and tenacity of neoliberalism during the past two decades cannot be explained, in an instrumental fashion, by any favorable effects of neoliberal policies on capitalist economic performance. On the contrary, we will present a case that neoliberalism has been harmful for long-run capitalist economic performance, even judging economic performance from the perspective of the interests of capital. It will be argued that the resurgence and continuing dominance of neoliberalism can be explained, at least in part, by changes in the competitive structure of world capitalism, which have resulted in turn from the particular form of global economic integration that has developed in recent decades. The changed competitive structure of capitalism has altered the political posture of big business with regard to economic policy and the role of the state, turning big business from a supporter of state-regulated capitalism into an opponent of it. ..."
"... Second, the neoliberal model creates instability on the macroeconomic level by renouncing state counter-cyclical spending and taxation policies, by reducing the effectiveness of "automatic stabilizers" through shrinking social welfare programs,3 and by loosening public regulation of the financial sector. This renders the system more vulnerable to major financial crises and depressions. Third, the neoliberal model tends to intensify class conflict, which can potentially discourage capitalist investment.4 ..."
"... The evidence from GDP and labor productivity growth rates supports the claim that the neoliberal model is inferior to the state regulationist model for key dimensions of capitalist economic performance. There is ample evidence that the neoliberal model has shifted income and wealth in the direction of the already wealthy. However, the ability to shift income upward has limits in an economy that is not growing rapidly. Neoliberalism does not appear to be delivering the goods in the ways that matter the most for capitalism's long-run stability and survival. ..."
"... Once capitalism had become well established in the US after the Civil War, it entered a period of cutthroat competition and wild accumulation known as the Robber Baron era. In this period a coherent anti-interventionist liberal position emerged and became politically dominant. Despite the enormous inequalities, the severe business cycle, and the outrageous and often unlawful behavior of the Goulds and Rockefellers, the idea that government should not intervene in the economy held sway through the end of the 19th century. ..."
"... Small business has remained adamantly opposed to the big, interventionist state, from the Progressive Era through the New Deal down to the present. This division between big and small business is chronicled for the Progressive Era in Weinstein (1968). In the decades immediately following World War II one can observe this division in the divergent views of the Business Roundtable, a big business organization which often supported interventionist programs, and the US Chambers of Commerce, the premier small business organization, which hewed to an antigovernment stance. ..."
"... By contrast, the typical small business faces a daily battle for survival, which prevents attention to long-run considerations and which places a premium on avoiding the short-run costs of taxation and state regulation. This explains the radically different positions that big business and small business held regarding the proper state role in the economy for the first two-thirds of the twentieth century. ..."
"... This long-standing division between big business and small business appeared to vanish in the US starting in the 1970s. Large corporations and banks which had formerly supported foundations that advocated an active government role in the economy, such as the Brookings Institution, became big donors to neoliberal foundations such as the American Enterprise Institute and the Heritage Foundation. As a result, such right-wing foundations, which previously had to rely mainly on contributions from small business, became very wealthy and influential.10 It was big business=s desertion of the political coalition supporting state intervention and its shift to neoliberalism that rebuilt support for neoliberal theories and policies in the US, starting in the 1970s. With business now unified on economic policy, the shift was dramatic. Big grants became available for economics research having a neoliberal slant. The major media shifted their spin on political developments, and the phrase "government programs" now could not be printed except with the word "bloated" before it. ..."
"... Globalization is usually defined as an increase in the volume of cross-border economic interactions and resource flows, producing a qualitative shift in the relations between national economies and between nation-states (Baker et. al., 1998, p. 5; Kozul-Wright and Rowthorn, 1998, p. 1). Three kinds of economic interactions have increased substantially in past decades: merchandise trade flows, foreign direct investment, and cross-border financial investments. We will briefly examine each, with an eye on their effects on the competitive structure of contemporary capitalism. ..."
"... By the close of the twentieth century, capitalism had become significantly more globalized than it had been fifty years ago, and by some measures it is much more globalized than it had been at the previous peak of this process in 1913. The most important features of globalization today are greatly increased international trade, increased flows of capital across national boundaries (particularly speculative short-term capital), and a major role for large TNCs in manufacturing, extractive activities, and finance, operating worldwide yet retaining in nearly all cases a clear base in a single nation-state. ..."
"... Some analysts argue that globalization has produced a world of such economic interdependence that individual nation-states no longer have the power to regulate capital. However, while global interdependence does create difficulties for state regulation, this effect has been greatly exaggerated. Nation-states still retain a good deal of potential power vis-a-vis capitalist firms, provided that the political will is present to exercise such power. For example, even such a small country as Malaysia proved able to successfully impose capital controls following the Asian financial crisis of 1997, despite the opposition of the IMF and the US government. ..."
"... Globalization appears to be one factor that has transformed big business from a supporter to an opponent of the interventionist state. It has done so partly by producing TNCs whose tie to the domestic markets for goods and labor is limited. ..."
"... Globalization has produced a world capitalism that bears some resemblance to the Robber Baron Era in the US. Giant corporations battle one another in a system lacking well defined rules. Mergers and acquisitions abound, including some that cross national boundaries, but so far few world industries have evolved the kind of tight oligopolistic structure that would lay the basis for a more controlled form of market relations. Like the late 19th century US Robber Barons, today's large corporations and banks above all want freedom from political burdens and restraints as they confront one another in world markets.18 ..."
"... The existence of a powerful bloc of Communist-run states with an alternative "state socialist" socioeconomic system tended to push capitalism toward a state regulationist form. It reinforced the fear among capitalists that their own working classes might turn against capitalism. It also had an impact on relations among the leading capitalist states, promoting inter-state unity behind US leadership, which facilitated the creation and operation of a world-system of state-regulated capitalism.19 The demise of state socialism during 1989-91 removed one more factor that had reinforced the regulationist state. ..."
"... If state socialism re-emerged in one or more major countries, perhaps this might push the capitalist world back toward the regulationist state. However, such a development does not seem likely. Even if Russia or Ukraine at some point does head in that direction, it would be unlikely to produce a serious rival socioeconomic system to that of world capitalism. ..."
Department of Economics and Political Economy Research Institute Thompson Hall University
of Massachusetts Amherst, MA 01003 U.S.A. Telephone 413-545-1248 Fax 413-545-2921 Email firstname.lastname@example.org
August, 2000 This paper was published in Rethinking Marxism, Volume 12, Number 2, Summer 2002,
Research assistance was provided by Elizabeth Ramey and Deger Eryar. Research funding
was provided by the Political Economy Research Institute of the University of Massachusetts at Amherst.
Globalization and Neoliberalism 1 For some two decades neoliberalism has dominated economic
policymaking in the US and the UK. Neoliberalism has strong advocates in continental Western Europe
and Japan, but substantial popular resistance there has limited its influence so far, despite continuing
US efforts to impose neoliberal policies on them. In much of the Third World, and in the transition
countries (except for China), the US has been successful in dictating neoliberal policies, acting
partly through the IMF and World Bank and partly through direct pressure.
Neoliberalism is an updated version of the classical liberal economic thought that was dominant
in the US and UK prior to the Great Depression of the 1930s. From roughly the mid 1930s to the mid
1970s a new "interventionist" approach replaced classical liberalism, and it became the accepted
belief that capitalism requires significant state regulation in order to be viable. In the 1970s
the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then
in the realm of public policy.
Neoliberalism is both a body of economic theory and a policy stance. Neoliberal theory claims
that a largely unregulated capitalist system (a "free market economy" not only embodies the ideal
of free individual choice but also achieves optimum economic performance with respect to efficiency,
economic growth, technical progress, and distributional justice. The state is assigned a very limited
economic role: defining property rights, enforcing contracts, and regulating the money supply.1 State
intervention to correct market failures is viewed with suspicion, on the ground that such intervention
is likely to create more problems than it solves.
The policy recommendations of neoliberalism are concerned mainly with dismantling what remains
of the regulationist welfare state. These recommendations include deregulation of business; privatization
of public activities and assets; elimination of, or cutbacks in, social welfare programs; and reduction
of taxes on businesses and the investing class. In the international sphere, neoliberalism calls
for free movement of goods, services, capital, and money (but not people) across national boundaries.
That is, corporations, banks, and individual investors should be free to move their property across
national boundaries, and free to acquire property across national boundaries, although free cross-border
movement by individuals is not part of the neoliberal program. How can the re-emergence of a seemingly
outdated and outmoded economic theory be explained? At first many progressive economists viewed the
1970s lurch toward liberalism as a temporary response to the economic instability of that decade.
As corporate interests decided that the Keynesian regulationist approach no longer worked to their
advantage, they looked for an alternative and found only the old liberal ideas, which could at least
serve as an ideological basis for cutting those state programs viewed as obstacles to profit-making.
However, neoliberalism has proved to be more than just a temporary response. It has outlasted the
late 1970s/early 1980s right-wing political victories in the UK (Thatcher) and US (Reagan). Under
a Democratic Party administration in the US and a Labor Party government in the UK in the 1990s,
neoliberalism solidified its position of dominance.
This paper argues that the resurgence and tenacity of neoliberalism during the past two decades
cannot be explained, in an instrumental fashion, by any favorable effects of neoliberal policies
on capitalist economic performance. On the contrary, we will present a case that neoliberalism has
been harmful for long-run capitalist economic performance, even judging economic performance from
the perspective of the interests of capital. It will be argued that the resurgence and continuing
dominance of neoliberalism can be explained, at least in part, by changes in the competitive structure
of world capitalism, which have resulted in turn from the particular form of global economic integration
that has developed in recent decades. The changed competitive structure of capitalism has altered
the political posture of big business with regard to economic policy and the role of the state, turning
big business from a supporter of state-regulated capitalism into an opponent of it.
The Problematic Character of Neoliberalism
Neoliberalism appears to be problematic as a dominant theory for contemporary capitalism. The
stability and survival of the capitalist system depends on its ability to bring vigorous capital
accumulation, where the latter process is understood to include not just economic expansion but also
technological progress. Vigorous capital accumulation permits rising profits to coexist with rising
living standards for a substantial part of the population over the long-run.2 However, it does not
appear that neoliberalism promotes vigorous capital accumulation in contemporary capitalism. There
are a number of reasons why one would not expect the neoliberal model to promote rapid accumulation.
First, it gives rise to a problem of insufficient aggregate demand over the long run, stemming from
the powerful tendency of the neoliberal regime to lower both real wages and public spending.
Second, the neoliberal model creates instability on the macroeconomic level by renouncing state counter-cyclical
spending and taxation policies, by reducing the effectiveness of "automatic stabilizers" through
shrinking social welfare programs,3 and by loosening public regulation of the financial sector. This
renders the system more vulnerable to major financial crises and depressions. Third, the neoliberal
model tends to intensify class conflict, which can potentially discourage capitalist investment.4
The historical evidence confirms doubts about the ability of the neoliberal model to promote rapid
capital accumulation. We will look at growth rates of gross domestic product (GDP) and of labor productivity.
The GDP growth rate provides at least a rough approximation of the rate of capital accumulation,
while the labor productivity growth rate tells us something about the extent to which capitalism
is developing the forces of production via rising ratios of means of production to direct labor,
technological advance, and improved labor skills.5 Table 1 shows average annual real GDP growth rates
for six leading developed capitalist countries over two periods, 1950-73 and 1973-99. The first period
was the heyday of state-regulated capitalism, both within those six countries and in the capitalist
world-system as a whole. The second period covers the era of growing neoliberal dominance. All six
countries had significantly faster GDP growth in the earlier period than in the later one.
While Japan and the major Western European economies have been relatively depressed in the 1990s,
the US is often portrayed as rebounding to great prosperity over the past decade. Neoliberals often
claim that US adherence to neoliberal policies finally paid off in the 1990s, while the more timid
moves away from state-interventionist policies in Europe and Japan kept them mired in stagnation.
Table 2 shows GDP and labor productivity growth rates for the US economy for three subperiods during
1948-99.6 Column 1 of Table 2 shows that GDP growth was significantly slower in 1973-90 B a period
of transition from state-regulated capitalism to the neoliberal model in the US B than in 1948-73.
While GDP growth improved slightly in 1990-99, it remained well below that of the era of state-regulated
capitalism. Some analysts cite the fact that GDP growth accelerated after 1995, averaging 4.1% per
year during 1995-99 (US Bureau of Economic Analysis, 2000). However, it is not meaningful to compare
a short fragment of the 1990s business cycle expansion to the longrun performance of the economy
Column 2 of Table 1 shows that the high rate of labor productivity growth recorded in 1948- 73
fell by more than half in 1973-90. While there was significant improvement in productivity growth
in the 1990s, it remained well below the 1948-73 rate, despite the rapid spread of what should be
productivity-enhancing communication and information-management technologies during the past decade.
The evidence from GDP and labor productivity growth rates supports the claim that the neoliberal
model is inferior to the state regulationist model for key dimensions of capitalist economic performance.
There is ample evidence that the neoliberal model has shifted income and wealth in the direction
of the already wealthy. However, the ability to shift income upward has limits in an economy that
is not growing rapidly. Neoliberalism does not appear to be delivering the goods in the ways that
matter the most for capitalism's long-run stability and survival.
The Structure of Competition and Economic Policy
The processes through which the dominant economic ideology and policies are selected in a
capitalist system are complex and many-sided. No general rule operates to assure that those economic
policies which would be most favorable for capitalism are automatically adopted. History suggests
that one important determinant of the dominant economic ideology and policy stance is the competitive
structure of capitalism in a given era. Specifically, this paper argues that periods of relatively
unconstrained competition tend to produce the intellectual and public policy dominance of liberalism,
while periods of relatively constrained, oligopolistic market relations tend to promote interventionist
ideas and policies.
A relation in the opposite direction also exists, one which is often commented upon. That is,
one can argue that interventionist policies promote monopoly power in markets, while liberal policies
promote greater competition. This latter relation is not being denied here. Rather, it will be argued
that there is a normally-overlooked direction of influence, having significant historical explanatory
power, which runs from competitive structure to public policy. In the period when capitalism first
became well established in the US, during 1800-1860, the government played a relatively interventionist
role. The federal government placed high tariffs on competing manufactured goods from Europe, and
federal, state, and local levels of government all actively financed, and in some cases built and
operated, the new canal and rail system that created a large internal market. There was no serious
debate over the propriety of public financing of transportation improvements in that era -- the only
debate was over which regions would get the key subsidized routes.
Once capitalism had become well established in the US after the Civil War, it entered a period
of cutthroat competition and wild accumulation known as the Robber Baron era. In this period a coherent
anti-interventionist liberal position emerged and became politically dominant. Despite the enormous
inequalities, the severe business cycle, and the outrageous and often unlawful behavior of the Goulds
and Rockefellers, the idea that government should not intervene in the economy held sway through
the end of the 19th century.
From roughly 1890 to 1903 a huge merger wave transformed the competitive structure of US capitalism.
Out of that merger wave emerged giant corporations possessing significant monopoly power in the manufacturing,
mining, transportation, and communication sectors. US industry settled down to a more restrained
form of oligopolistic rivalry. At the same time, many of the new monopoly capitalists began to criticize
the old Laissez Faire ideas and support a more interventionist role for the state.8 The combination
of big business support for state regulation of business, together with similar demands arising from
a popular anti-monopoly movement based among small farmers and middle class professionals, ushered
in what is called the Progressive Era, from 1900-16. The building of a regulationist state that was
begun in the Progressive Era was completed during the New Deal era a few decades later, when once
again both big business leaders and a vigorous popular movement (this time based among industrial
workers) supported an interventionist state. Both in the Progressive Era and the New Deal, big business
and the popular movement differed about what types of state intervention were needed. Big business
favored measures to increase the stability of the system and to improve conditions for profit-making,
while the popular movement sought to use the state to restrain the power and privileges of big business
and provide greater security for ordinary people. The outcome in both cases was a political compromise,
one weighted toward the interests of big business, reflecting the relative power of the latter in
Small business has remained adamantly opposed to the big, interventionist state, from the Progressive
Era through the New Deal down to the present. This division between big and small business is chronicled
for the Progressive Era in Weinstein (1968). In the decades immediately following World War II one
can observe this division in the divergent views of the Business Roundtable, a big business organization
which often supported interventionist programs, and the US Chambers of Commerce, the premier small
business organization, which hewed to an antigovernment stance.
What explains this political difference between large and small business? When large corporations
achieve significant market power and become freed from fear concerning their immediate survival,
they tend to develop a long time horizon and pay attention to the requirements for assuring growing
profits over time.9 They come to see the state as a potential ally. Having high and stable monopoly
profits, they tend to view the cost of government programs as something they can afford, given their
potential benefits. By contrast, the typical small business faces a daily battle for survival, which
prevents attention to long-run considerations and which places a premium on avoiding the short-run
costs of taxation and state regulation. This explains the radically different positions that big
business and small business held regarding the proper state role in the economy for the first two-thirds
of the twentieth century.
This long-standing division between big business and small business appeared to vanish in the
US starting in the 1970s. Large corporations and banks which had formerly supported foundations that
advocated an active government role in the economy, such as the Brookings Institution, became big
donors to neoliberal foundations such as the American Enterprise Institute and the Heritage Foundation.
As a result, such right-wing foundations, which previously had to rely mainly on contributions from
small business, became very wealthy and influential.10 It was big business=s desertion of the political
coalition supporting state intervention and its shift to neoliberalism that rebuilt support for neoliberal
theories and policies in the US, starting in the 1970s. With business now unified on economic policy,
the shift was dramatic. Big grants became available for economics research having a neoliberal slant.
The major media shifted their spin on political developments, and the phrase "government programs"
now could not be printed except with the word "bloated" before it.
This switch in the dominant economic model first showed up in the mid 1970s in academic economics,
as the previously marginalized Chicago School spread its influence far beyond the University of Chicago.
This was soon followed by a radical shift in the public policy arena. In 1978- 79 the previously
interventionist Carter Administration began sounding the very neoliberal themes B deregulation of
business, cutbacks in social programs, and general fiscal and monetary austerity B that were to become
the centerpiece of Reagan Administration policies in 1981. What caused the radical change in the
political posture of big business regarding state intervention in the economy? This paper argues
that a major part of the explanation lies in the effects of the globalization of the world capitalist
economy in the post-World War II period.
Globalization and Competition
Globalization is usually defined as an increase in the volume of cross-border economic
interactions and resource flows, producing a qualitative shift in the relations between national
economies and between nation-states (Baker et. al., 1998, p. 5; Kozul-Wright and Rowthorn, 1998,
p. 1). Three kinds of economic interactions have increased substantially in past decades: merchandise
trade flows, foreign direct investment, and cross-border financial investments. We will briefly examine
each, with an eye on their effects on the competitive structure of contemporary capitalism.
Table 3 shows the ratio of merchandise exports to gross domestic product for selected years from
1820 to 1992, for the world and also for Western Europe, the US, and Japan. Capitalism brought a
five-fold rise in world exports relative to output from 1820-70, followed by another increase of
nearly three-fourths by 1913. After declining in the interwar period, world exports reached a new
peak of 11.2% of world output in 1973, rising further to 13.5% in 1992. The 1992 figure was over
fifty per cent higher than the pre-World War I peak.
Merchandise exports include physical goods only, while GDP includes services, many of which are
not tradable, as well as goods. In the twentieth century the proportion of services in GDP has risen
significantly. Table 4 shows an estimate of the ratio of world merchandise exports to the good-only
portion of world GDP. This ratio nearly tripled during 1950-92, with merchandise exports rising to
nearly one-third of total goods output in the latter year. The 1992 figure was 2.6 times as high
as that of 1913.
Western Europe, the US, and Japan all experienced significant increases in exports relative to
GDP during 1950-92, as Table 3 shows. All of them achieved ratios of exports to GDP far in excess
of the 1913 level. While exports were only 8.2% of the total GDP of the US in 1992, exports amounted
to 22.0% of the non-service portion of GDP that year (Economic Report of the President, 1999,
pp. 338, 444).
Many analysts view foreign direct investment as the most important form of cross-border economic
interchange. It is associated with the movement of technology and organizational methods, not just
goods. Table 5 shows two measures of foreign direct investment. Column 1 gives the outstanding stock
of foreign direct investment in the world as a percentage of world output. This measure has more
than doubled since 1975, although it is not much greater today than it was in 1913. Column 2 shows
the annual inflow of direct foreign investment as a percentage of gross fixed capital formation.
This measure increased rapidly during 1975-95. However, it is still relatively low in absolute terms,
with foreign direct investment accounting for only 5.2 per cent of gross fixed capital formation
Not all, or even most, international capital flows take the form of direct investment. Financial
flows (such as cross-border purchases of securities and deposits in foreign bank accounts) are normally
larger. One measure that takes account of financial as well as direct investment is the total net
movement of capital into or out of a country. That measure indicates the extent to which capital
from one country finances development in other countries. Table 6 shows the absolute value of current
account surpluses or deficits as a percentage of GDP for 12 major capitalist countries. Since net
capital inflow or outflow is approximately equal to the current account deficit or surplus (differing
only due to errors and omissions), this indicates the size of net cross-border capital flows. The
ratio nearly doubled from 1970-74 to 1990-96, although it remained well below the figure for 1910-14.
Cross-border gross capital movements have grown much more rapidly than cross-border
net capital movements.11 In recent times a very large and rapidly growing volume of capital has
moved back and forth across national boundaries. Much of this capital flow is speculative in nature,
reflecting growing amounts of short-term capital that are moved around the world in search of the
best temporary return. No data on such flows are available for the early part of this century, but
the data for recent decades are impressive. During 1980-95 cross-border transactions in bonds and
equities as a percentage of GDP rose from 9% to 136% for the US, from 8% to 168% for Germany, and
from 8% to 66% for Japan (Baker et. al., 1998, p. 10). The total volume of foreign exchange transactions
in the world rose from about $15 billion per day in 1973 to $80 billion per day in 1980 and $1260
billion per day in 1995. Trade in goods and services accounted for 15% of foreign exchange transactions
in 1973 but for less than 2% of foreign exchange transactions in 1995 (Bhaduri, 1998, p. 152).
While cross-border flows of goods and capital are usually considered to be the best indicators
of possible globalization of capitalism, changes that have occurred over time within capitalist enterprises
are also relevant. That is, the much-discussed rise of the transnational corporation (TNC) is relevant
here, where a TNC is a corporation which has a substantial proportion of its sales, assets, and employees
outside its home country.12 TNCs existed in the pre-World War I era, primarily in the extractive
sector. In the post-World War II period many large manufacturing corporations in the US, Western
Europe, and Japan became TNCs.
The largest TNCs are very international measured by the location of their activities. One study
found that the 100 largest TNCs in the world (ranked by assets) had 40.4% of their assets abroad,
50.0% of output abroad, and 47.9% of employment abroad in 1996 (Sutcliffe and Glyn, 1999, p. 125).
While this shows that the largest TNCs are significantly international in their activities, all but
a handful have retained a single national base for top officials and major stockholders.13 The top
200 TNCs ranked by output were estimated to produce only about 10 per cent of world GDP in 1995 (Sutcliffe
and Glyn, 1999, p. 122).
By the close of the twentieth century, capitalism had become significantly more globalized than
it had been fifty years ago, and by some measures it is much more globalized than it had been at
the previous peak of this process in 1913. The most important features of globalization today are
greatly increased international trade, increased flows of capital across national boundaries (particularly
speculative short-term capital), and a major role for large TNCs in manufacturing, extractive activities,
and finance, operating worldwide yet retaining in nearly all cases a clear base in a single nation-state.
While the earlier wave of globalization before World War I did produce a capitalism that was significantly
international, two features of that earlier international system differed from the current global
capitalism in ways that are relevant here. First, the pre-world War I globalization took place within
a world carved up into a few great colonial empires, which meant that much of the so-called "cross-border"
trade and investment of that earlier era actually occurred within a space controlled by a single
state. Second, the high level of world trade reached before World War I occurred within a system
based much more on specialization and division of labor. That is, manufactured goods were exported
by the advanced capitalist countries in exchange for primary products, unlike today when most trade
is in manufactured goods. In 1913 62.5% of world trade was in primary products (Bairoch and Kozul-Wright,
1998, p. 45). By contrast, in 1970 60.9% of world exports were manufactured goods, rising to 74.7%
in 1994 (Baker et. al., 1998, p. 7).
Some analysts argue that globalization has produced a world of such economic interdependence that
individual nation-states no longer have the power to regulate capital. However, while global interdependence
does create difficulties for state regulation, this effect has been greatly exaggerated. Nation-states
still retain a good deal of potential power vis-a-vis capitalist firms, provided that the political
will is present to exercise such power. For example, even such a small country as Malaysia proved
able to successfully impose capital controls following the Asian financial crisis of 1997, despite
the opposition of the IMF and the US government. A state that has the political will to exercise
some control over movements of goods and capital across its borders still retains significant power
to regulate business. The more important effect of globalization has been on the political will to
undertake state regulation, rather than on the technical feasibility of doing so. Globalization has
had this effect by changing the competitive structure of capitalism. It appears that globalization
in this period has made capitalism significantly more competitive, in several ways. First, the rapid
growth of trade has changed the situation faced by large corporations. Large corporations that had
previously operated in relatively controlled oligopolistic domestic markets now face competition
from other large corporations based abroad, both in domestic and foreign markets. In the US the rate
of import penetration of domestic manufacturing markets was only 2 per cent in 1950; it rose to 8%
in 1971 and 16% by 1993, an 8-fold increase since 1950 (Sutcliffe and Glyn, 1999, p. 116).
Second, the rapid increase in foreign direct investment has in many cases placed TNCs production
facilities in the home markets of their foreign rivals. General Motors not only faces import competition
from Toyota and Honda but has to compete with US-produced Toyota and Honda vehicles. Third, the increasingly
integrated and open world financial system has thrown the major banks and other financial institutions
of the leading capitalist nations increasingly into competition with one another.
Globalization appears to be one factor that has transformed big business from a supporter to an
opponent of the interventionist state. It has done so partly by producing TNCs whose tie to the domestic
markets for goods and labor is limited. More importantly, globalization tends to turn big business
into small business. The process of globalization has increased the competitive pressure faced by
large corporations and banks, as competition has become a world-wide relationship.17 Even if those
who run large corporations and financial institutions recognize the need for a strong nationstate
in their home base, the new competitive pressure they face shortens their time horizon. It pushes
them toward support for any means to reduce their tax burden and lift their regulatory constraints,
to free them to compete more effectively with their global rivals. While a regulationist state may
seem to be in the interests of big business, in that it can more effectively promote capital accumulation
in the long run, in a highly competitive environment big business is drawn away from supporting a
Globalization has produced a world capitalism that bears some resemblance to the Robber Baron
Era in the US. Giant corporations battle one another in a system lacking well defined rules. Mergers
and acquisitions abound, including some that cross national boundaries, but so far few world industries
have evolved the kind of tight oligopolistic structure that would lay the basis for a more controlled
form of market relations. Like the late 19th century US Robber Barons, today's large corporations
and banks above all want freedom from political burdens and restraints as they confront one another
in world markets.18
The above interpretation of the rise and persistence of neoliberalism attributes it, at least
in part, to the changed competitive structure of world capitalism resulting from the process of globalization.
As neoliberalism gained influence starting in the 1970s, it became a force propelling the globalization
process further. One reason for stressing the line of causation running from globalization to neoliberalism
is the time sequence of the developments. The process of globalization, which had been reversed to
some extent by political and economic events in the interwar period, resumed right after World War
II, producing a significantly more globalized world economy and eroding the monopoly power of large
corporations well before neoliberalism began its second coming in the mid 1970s. The rapid rise in
merchandise exports began during the Bretton Woods period, as Table 3 showed. So too did the growing
role for TNC's. These two aspects of the current globalization had their roots in the postwar era
of state-regulated capitalism. This suggests that, to some extent, globalization reflects a long-run
tendency in the capital accumulation process rather than just being a result of the rising influence
of neoliberal policies. On the other hand, once neoliberalism became dominant, it accelerated the
process of globalization. This can be seen most clearly in the data on cross-border flows of both
real and financial capital, which began to grow rapidly only after the 1960s.
Other Factors Promoting Neoliberalism
The changed competitive structure of capitalism provides part of the explanation for the rise
from the ashes of classical liberalism and its persistence in the face of widespread evidence of
its failure to deliver the goods. However, three additional factors have played a role in promoting
neoliberal dominance. These are the weakening of socialist movements in the industrialized capitalist
countries, the demise of state socialism, and the long period that has elapsed since the last major
capitalist economic crisis. There is space here for only some brief comments about these additional
The socialist movements in the industrialized capitalist countries have declined in strength significantly
over the past few decades. While Social Democratic parties have come to office in several European
countries recently, they no longer represent a threat of even significant modification of capitalism,
much less the specter of replacing capitalism with an alternative socialist system. The regulationist
state was always partly a response to the fear of socialism, a point illustrated by the emergence
of the first major regulationist state of the era of mature capitalism in Germany in the late 19th
century, in response to the world=s first major socialist movement. As the threat coming from socialist
movements in the industrialized capitalist countries has receded, so too has to incentive to retain
the regulationist state.
The existence of a powerful bloc of Communist-run states with an alternative "state socialist"
socioeconomic system tended to push capitalism toward a state regulationist form. It reinforced the
fear among capitalists that their own working classes might turn against capitalism. It also had
an impact on relations among the leading capitalist states, promoting inter-state unity behind US
leadership, which facilitated the creation and operation of a world-system of state-regulated capitalism.19
The demise of state socialism during 1989-91 removed one more factor that had reinforced the regulationist
The occurrence of a major economic crisis tends to promote an interventionist state, since active
state intervention is required to overcome a major crisis. The memory of a recent major crisis tends
to keep up support for a regulationist state, which is correctly seen as a stabilizing force tending
to head off major crises. As the Great Depression of the 1930s has receded into the distant past,
the belief has taken hold that major economic crises have been banished forever. This reduces the
perceived need to retain the regulationist state.
If neoliberalism continues to reign as the dominant ideology and policy stance, it can be
argued that world capitalism faces a future of stagnation, instability, and even eventual social
breakdown.20 However, from the factors that have promoted neoliberalism one can see possible sources
of a move back toward state-regulated capitalism at some point. One possibility would be the development
of tight oligopoly and regulated competition on a world scale. Perhaps the current merger wave might
continue until, as happened at the beginning of the 20th century within the US and in other industrialized
capitalist economies, oligopoly replaced cutthroat competition, but this time on a world scale. Such
a development might revive big business support for an interventionist state. However, this does
not seem to be likely in the foreseeable future. The world is a big place, with differing cultures,
laws, and business practices in different countries, which serve as obstacles to overcoming the competitive
tendency in market relations. Transforming an industry=s structure so that two to four companies
produce the bulk of the output is not sufficient in itself to achieve stable monopoly power, if the
rivals are unable to communicate effectively with one another and find common ground for cooperation.
Also, it would be difficult for international monopolies to exercise effective regulation via national
governments, and a genuine world capitalist state is not a possibility for the foreseeable future.
If state socialism re-emerged in one or more major countries, perhaps this might push the capitalist
world back toward the regulationist state. However, such a development does not seem likely. Even
if Russia or Ukraine at some point does head in that direction, it would be unlikely to produce a
serious rival socioeconomic system to that of world capitalism.
A more likely source of a new era of state interventionism might come from one of the remaining
two factors considered above. The macro-instability of neoliberal global capitalism might produce
a major economic crisis at some point, one which spins out of the control of the weakened regulatory
authorities. This would almost certainly revive the politics of the regulationist state. Finally,
the increasing exploitation and other social problems generated by neoliberal global capitalism might
prod the socialist movement back to life at some point. Should socialist movements revive and begin
to seriously challenge capitalism in one or more major capitalist countries, state regulationism
might return in response to it. Such a development would also revive the possibility of finally superceding
capitalism and replacing it with a system based on human need rather than private profit.
"... As I pointed out above, Q1 2016 wells were significantly more productive than Q1 2015 wells, in the wells' first 90 days or less. As time goes by, we will get a clearer picture of how much more oil they will produce during the critical 36-60 months when the wells need to payout. ..."
texas tea ,
07/03/2016 at 7:38 pm
This is interesting and I realize goes against many here who view LTO as a plague, I think the
industry has it right, not the naysayers -- this is not to say the economies are like the East
Texas field, but it is to say given the alternatives best of class LTO played will be the focus
of activity/development coming out of this depression.
07/03/2016 at 9:34 pm
shallow sand ,
07/04/2016 at 12:50 am
That article (the referenced Reuters story describing a lessening of the decline curve) is only
the tip of the iceberg.
Many of the operators are catching on to what EOG has been doing with their fracs, namely scouring/sandblasting
the heck out of the near wellbore area with 100 mesh and then following up with larger proppant
to maintain conductivity.
In addition, the increased formation pressure induced by new fracs is increasing output in
nearby, older wells. This process has been repeated over and over again in numerous older wells
in the core of the Bakken now that the drilling has contracted to a fairly small, highly productive
area full of the older wells.
LTO is not a plague. The plague is development of same out of primarily debt, as opposed to primarily
out of cash flow.
As I pointed out above, Q1 2016 wells were significantly more productive than Q1 2015 wells,
in the wells' first 90 days or less. As time goes by, we will get a clearer picture of how much
more oil they will produce during the critical 36-60 months when the wells need to payout.
$50 WTI looks to be a very hard ceiling last couple of months.
More important is the money made available to drill, complete and equip them. The banks appear
to be wary. Equity investors like the Permian and SCOOP/STACK.
"... In way, both side to this debate are warning that we are slipping into nightmare scenarios. The globalists believe that Britain exiting the EU and Donald Trump occupying the White House are the harbingers of things to come ..."
"... Mirror-imaging this vision of hell on Earth, nationalists predict that globalism and its four horses of the apocalypse-free trade, immigration, financial deregulation ..."
"... From that perspective, globalism, like Marxism, another example of the idea of economic determinism, failed to materialize and proved to be an illusion. The economic rewards provided through the process of globalization were not spread evenly in society: Turning the lords of finance and high-tech into super-billionaires who fashion themselves as the Master of the Universe, while decimating the large manufacturing industries and creating a new class of losers among the economically squeezed members of the middle class and blue-class workers. ..."
"... Brexit and Trumpism may be indication that a political backlash is taking place right now and that nationalism is on the rise. But we shouldn't conclude that nationalism is about to replace globalism as the new driving force in politics and economics. Instead it's a sign that a certain rebalancing between these two forces is creating a basis for a new equilibrium in industrialized societies. ..."
"... That means in practical terms that the political and economic elites may have to slow down their efforts to liberalize global trade, deregulate financial markets and open borders to new immigration. They need to reassess some aspects of the ambitious globalization agenda: supranational institutions, like the EU, will need to return more power to national governments. Some free trade agreements may have to be renegotiated. Immigration needs to be restricted based on economic, national security and cultural considerations. And celebrate the passage of same-sex legislation before trying to force schools to allow "trans" men to use the women's toilets. Easy does it! ..."
Much of the post-Brexit and primary election conventional wisdom seems to be stuck in a political
narrative in which the Brexit vote and the rise of Trumpism in the United States are seen as symbols
of the populist revolution. These symbols are combined with a nationalist tide has been sweeping
not only the United Kingdom and the United States, but also many other parts of Europe, including
Poland, Hungary, France, The Netherlands and Scandinavia, not to mention, Russia, Turkey, India and
According to this narrative, economic insecurity and cultural anxiety that reflect sociodemographic
trends have given momentum to ethnonationalism and religious separatism in both the United States
and the United Kingdom. The Rust Belt is pitted against New York City, and the Midlands against London.
The aging blue-collar workers and residents of the rural areas, remnants of the shrinking white
English tribe-patriotic, God-fearing and hardworking-have lost their jobs in the declining manufacturing
industries the never recovered from the Great Recession. They feel that they have been economically
squeezed by the forces of globalization that are being promoted by the political and economic elites
in New York and London, that they are culturally marginalized and threatened by nonwhite immigrants
who are "taking over" their country, and that secular liberal elites are responsible for the cultural
decadence that is supposedly inflicting their societies.
At the same time, gigantic metropolitan areas have been growing and prospering thanks to globalization
and immigration: a flourishing globalized service economy; a concentration of young and educated
professionals; immigrants that are mostly integrated into open societies; tolerance of the other
and accommodation of changes in cultural mores, like same-sex marriage; a demographic balance that
is swinging in the direction of unmarried men and women, the young and the purveyors of the "cognitive
economy", rather than those with large families, the old and industrial workers.
Ironically, both the fans and the critics of globalism share versions of this narrative. The first
are bashing the ignorant, nativists, racists and xenophobic voters who are allegedly trying to place
obstacles on the way of the forces of political, economic and social change and progress. The latter
counter that "the people" are winning the day by protecting their national sovereignty and re-embracing
their national identity while challenging corrupt elites that are protecting their own political
and economic interests.
In way, both side to this debate are warning that we are slipping into nightmare scenarios. The
globalists believe that Britain exiting the EU and Donald Trump occupying the White House are the
harbingers of things to come: Mussolini's brown-shirts are on their way; and we all know who is going
to show in the not-so-distant future. Could it be…the Grand Wizard of the Ku Klux Klan? Or maybe
Mirror-imaging this vision of hell on Earth, nationalists predict that globalism and its four
horses of the apocalypse-free trade, immigration, financial deregulation and same-sex marriage-will
destroy our families, communities and nations. The first phase is NAFTA and EU. Next, world government
headed by the Antichrist and ruled by Sharia law.
This political narrative creates the impression the debate over the EU, Trumpism and globalism
in general pits the forces of light against the legions of evil, between two hardened groups of anti
and pro trade, immigration and secularism. If you support Brexit and plan vote for Trump you represent
either the dark or glorious past, while the other side envisions a dark or glorious future. These
deep political divisions in the UK, the United States and elsewhere would only end up with one side
winning, and the other side losing. Thesis, antithesis. No synthesis.
The problem with this narrative is that it doesn't really capture the complexity of the politics
and economics ushered by globalization since the early 1990s, when governments started to deregulate
financial markets, to increase and size and fast-track the liberalization of the global trade system,
and to remove the major restrictions on immigration.
From that perspective, globalism, like Marxism, another example of the idea of economic determinism,
failed to materialize and proved to be an illusion. The economic rewards provided through the process
of globalization were not spread evenly in society: Turning the lords of finance and high-tech into
super-billionaires who fashion themselves as the Master of the Universe, while decimating the large
manufacturing industries and creating a new class of losers among the economically squeezed members
of the middle class and blue-class workers.
Moreover, the dogma of globalism assumed that humans who desire to preserve their individual identity,
to have wings to fly and to gain economic freedom, would celebrate the dawn of a new age of economic
liberty. Long live the economic man!
But humans also want to belong to a group, to maintain a sense of collective identity and
to have roots in the past. When these two colliding needs are not in balance, the political man returns
and a political backlash to achieve new equilibrium is inevitable.
Brexit and Trumpism may be indication that a political backlash is taking place right now and
that nationalism is on the rise. But we shouldn't conclude that nationalism is about to replace globalism
as the new driving force in politics and economics. Instead it's a sign that a certain rebalancing
between these two forces is creating a basis for a new equilibrium in industrialized societies.
That means in practical terms that the political and economic elites may have to slow down their
efforts to liberalize global trade, deregulate financial markets and open borders to new immigration.
They need to reassess some aspects of the ambitious globalization agenda: supranational institutions,
like the EU, will need to return more power to national governments. Some free trade agreements may
have to be renegotiated. Immigration needs to be restricted based on economic, national security
and cultural considerations. And celebrate the passage of same-sex legislation before trying to force
schools to allow "trans" men to use the women's toilets. Easy does it!
Promoting and embracing such correction to the globalism project and the liberal principles it
embodies doesn't amount to buying into the notions of ultranationalism, protectionism, nativism or
racism. They seem to be sensible responses by political leaders to the legitimate concerns of their
voters and a way to deny political demagogues the opportunity to exploit economic anxiety and social
"... Viewed in economic terms, however, the Brexit marks the first tangible retreat from globalization since World War II. ..."
The reasons for the British vote to leave the EU were diverse, ranging from discontent with
the Brussels bureaucracy and hostility toward the political establishment to fear of immigration.
Viewed in economic terms, however, the Brexit marks the first tangible retreat from
globalization since World War II.
"For the first time, a major economy is saying: We will be better off doing
things by ourselves, and making our own decisions," says Homi Kharas, Deputy
Director for the Global Economy and Development program at the Brookings
Institution, a Washington-based think tank. "And that's a bit of a shock to
the system," he added.
For 70 years, globalization has been promoted as
the answer to the world's problems. International trade, capital flows and
cross-border movement of people have been steadily increasing.
The consensus was that more globalization was good for all - rich and
poor alike. Countless studies and growing middle classes in China and India
seem to prove that point. And Europe, with its single market and free
movement of people, was "the shining example" of this trend, Kharas noted.
"... The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction. ..."
"... Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive. ..."
"... Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment. ..."
"... Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month. ..."
"... The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam. ..."
"... I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling. ..."
"... So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well. ..."
"... They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened. ..."
"... granting automatic work authorization to all H-1B spouses. ..."
"... expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years ..."
"... lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour. ..."
"... modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa ..."
"... There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions. ..."
"... Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket to live in America and take a job from an American. ..."
"... I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!) ..."
"... Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs). ..."
"... Thats pretty much how the movie/tv industry operates in Hollywood. ..."
"... History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability. ..."
"... All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are. ..."
"... The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity. ..."
A new Council
of Economic Advisers study released by the White House on the fall in labor force participation among
men of prime working age (25 to 54) should be subtitled, "It's the Neoliberal Economy, Stupid."
The report does a useful job in documenting where the level and nature of the decline in male
workforce participation, which peaked at 98% in 1954 and is now at 88%, the third lowest among OECD
countries. The decline is concentrated among less educated:
Blacks have been hit harder than other groups:
And the general outlook for employment has been deteriorating over time. However, bear in mind
that this decay somewhat overlaps with the story that less educated groups have been harder hit.
US educational attainment has fallen over time.
The report dismisses the myths that access to Social Security disability or that men are not choosing
to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have
a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis
find that Social Security disability explains at most 0.5% of the reduction.
The cause is the state of the job market:
• Participation has fallen particularly steeply for less-educated men at the same time as their
wages have dropped relative to more-educated men, consistent with a decline in demand.
o In recent decades, less-educated Americans have suffered a reduction in their wages relative
to other groups. From 1975 until 2014, relative wages for those with a high school degree fell
from over 80 percent of the amount earned by workers with at least a college degree to less
than 60 percent
While doing a fine job dimensioning profile of the groups that have been hit the worst, the authors,
after invoking hoary neoliberal defenses, as in these workers are the losers in a globalized market,
the paper gives a coded acknowledgment that policies that are hostile to workers have produced the
This reduction in demand, as reflected in lower wages, could reflect the broader evolution
of technology, automation, and globalization in the U.S. economy.
Conventional economic theory posits that more "flexible" labor markets-where it is easier to
hire and fire workers-facilitate matches between employers and individuals who want to work. Yet
despite having among the most flexible labor markets in the OECD-with low levels of labor market
regulation and employment protections, a low minimum cost of labor, and low rates of collective
bargaining coverage-the United States has one of the lowest prime-age male labor force participation
rates of OECD member countries.
It is remarkably cheeky to see the authors attempt to depict "flexible" labor markets, where workers
can be tossed on the trash heap, as beneficial to laborers.
The recommendations are tepid, and the authors assert "A number of policies proposed by the Administration
would help to boost prime-age male labor force participation." In other words, we are to believe
the problem is those Republican meanies in Congress, as opposed to Obama not pushing hard for these
measures in his first term, when he had the opportunity to pass wide-ranging reforms.
One proposal is the new conventional wisdom of more infrastructure spending to create more jobs
for unskilled workers directly, improving community colleges and other training so workers will have
skills that line up with hot job markets. The problem with the latter idea is that demand can shift
quickly (look at how the oil patch was robust a few years back and is now just starting to get back
on its feet). Moreover, employers are extremely prejudiced against both older people and people who've
been out of the workforce, and the age which is deemed to be "older" has collapsed.
Per Wolf Richter (emphasis original):
Now I've come across a fascinating piece on MarketWatch, an article on what to do to get into
the cross hairs of a recruiter whose algos are combing through millions of profiles on LinkedIn.
No recruiter in his right might is personally clicking through LinkedIn profiles. They're all
scanned by algos by the millions in nanoseconds. And so the trick is structuring your profile
to get the algos to pay attention. This isn't a human-to-human scenario, but a human-to-algo scenario.
You're trying to second-guess an algo that's going to decide your future….
But apparently the lifespan of a degree has been shortened from 20 or 25 years to just 10 years!
Then it rots, and it has to be swept under the rug. The article put it this way (emphasis added):
I mean, I'm already seething.
Older job-seekers need to walk a fine line. Unless you made the cover of
"Time" or discovered a solar galaxy, experience has a shelf life on LinkedIn, says Scott Dobroski,
career trends analyst at Glassdoor. There's no need to wax lyrical about a job that's more
than 10 years old, he says. And those who g raduated from college a decade ago
may want to exclude the date they graduated. "Your college graduation date will age
you," he says, "and although ageism is illegal, it's happening all the time." On the other
hand, if you're applying for a job as CEO of a Fortune 500 company and you graduated in 1986,
it's okay to leave the date, Dobroski says.
Note the word "older job seekers" in connection with a college degree from 10 years ago. Those
older job seekers are early Millennials!
Yves here. Admittedly, candidates on LinkedIn are more educated than the group this study is most
concerned about, but consider the message: even among the educated, the shelf life of a degree has
diminished greatly due to ageism. Why would it be less bad among the less well educated?
Similarly, the problem with European-style job training programs is that US employers do not want
to hire people with general training, even in a particular skill area. Their strong preference is
to hire someone who is doing the exact same job for a similar company, so as to minimize their effort
(in theory; in practice, the extra time spent on the search probably offsets the theoretical savings).
The cure for that is a much more robust job market, where employers realize they are not going to
find the perfect candidate and take someone approximate and give them the training and other guidance
they need to become productive.
And finally, the report claims that Obama has been pumping for one of the most needed remedies:
Increasing wages for workers by raising the minimum wage, supporting collective bargaining,
and ensuring that workers have a strong voice in the labor market.
So I'm at a loss to understand the political purpose of this report. It's useless as a policy
driver given that this is an election year when Obama is a lame duck. Perhaps it is a weak effort
at legacy-bolstering by showing that even though the decline in labor force participation among men
was marked in the Obama Administration, it started long before he took office. But it still ignores
some elephants in the room, like the fact that employers stopped sharing the benefits of productivity
gains with workers starting in the mid-1970s and lack of sufficient demand in the economy. What it
does reveal is one of the many time-bombs that Obama has left for the next President.
June 21, 2016 at 7:27 am
June 21, 2016 at 8:52 am
Time to start blaming those darn
"stay-at-home" dads!! (PEW via CalculatedRisk) How much more evidence will it take for orthodox
economists to stop manufacturing silly excuses for a crappy job market.
June 22, 2016 at 9:08 am
Economists since the 1970s have been primarily involved with explaining away unemployment;
that is, saying it doesn't exist. This is because their theory of inflation (printing money =
inflation) breaks the rules of elementary algebra if unemployment does exist. To normal people
(non-economists) confronted with such a situation, the theory would quickly be abandoned as nonsense,
but to economists this is not an option, because this theory also says that big government is
bad, a truism that in the economics profession needs no explanation.
So you see, Marco, there is no crappy jobs market because there's no such thing as unemployment.
Ask any economist. They'll tell you.
June 21, 2016 at 7:34 am
Here are some nice nuggets from the CEA study on the stay-at-home dad myth:
"Participation rates have fallen for both parents and nonparents alike, but prime-age
males without children saw a larger decline of 9.4 percentage points since 1968 compared
to 4.9 percentage points among prime-age males with children. This suggests that men dropping
out of the labor force to be stay-at-home fathers is likely not an important factor in the overall
decline; moreover, only around a quarter of prime-age men who are not in the labor force are parents
(down from around 40 percent in 1968)."
"Based on [American Time Use Survey] data, there is little evidence that men are staying
home to care for children or to do house work. "
Of course, I am preaching to the choir here!
av av ,
June 21, 2016 at 10:20 am
"Blame the victim."
June 21, 2016 at 11:50 am
Low skilled workers are easiest to replace.
Example, you used to have people sweeping and washing floors in shopping centers or subway stations.
Now you have one person on a sweeper or washer.
June 21, 2016 at 3:06 pm
And how well is that working out? I'm serious. Perhaps they need a couple of more people ALONG
with the washers and sweepers. Sorry to use Disney, but part of the reason the parks are pristine
is because they have a whole lot of people going along picking up the trash and sweeping up.
It is not just technology, it is a management that doesn't understand how much labor they really
need and ignore the signs they do not have enough, because then their numbers might be down. And
this is even when their numbers are already down.
June 21, 2016 at 4:26 pm
It's really about how the priorities are set and by whom.
In a sane society, the issuer of the currency would pay people to do things people like to
do or benefit from doing themselves and pay for equipment/robots to do things people don't like.
We live a long way from there.
June 21, 2016 at 4:27 pm
Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the
US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little
to no equipment.
Steve Gunderson ,
June 21, 2016 at 5:08 pm
Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only
vacuumed once a month.
There is work to do. But not willingness to have people do it.
June 21, 2016 at 8:19 pm
Maybe teaching people to pickup after themselves should be a Freshman level course?
June 22, 2016 at 4:26 pm
Carpets need to be vacuumed.
June 21, 2016 at 8:10 am
It is not as simple as "technology". I often find that those who say lines like "robots are
going to take away all the jobs!" are those without actual degrees in those subjects. Technology
simply moves the plane of thought, processing, manufacturing, etc to the next level. The invention
of the computer spawned an entire multi-TRILLION dollar industry with millions of jobs. Robotics
will be/is the same.
The reality of what is happening is on the economic/political level. It involves a small number
of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest
bit of empathy or selflessness. These same people have literally no depth to their thought and
are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to
live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire
during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an
empire is a microcosm of any living organism; it gets old and becomes very susceptible to change,
that is, the ruling class become so removed from reality that their decision making begins to
deviate further and further from the actuality of the current situation. The Housing Crisis is
a prime example. The banks saw fit to literally scam their own customers with no government intervention!
Twice! This type of thinking quickly affects the entire nation. People begin to see a futility
in living morally and truthfully, and start to wonder if the entire system is a scam.
Now imagine the modern US economy as a sinking ship. The top level execs, elites, are busy
pillaging as much as they can, because they all see that US supremacy isn't going to last. Manufacturing
all moved to China, now Mexico, retail is dead in the water, the US consumer is getting weaker
and weaker. Only healthcare is staying afloat, due more to political reasons than anything else.
The easiest and most common method to increase your salary as a corporate exec is to get rid
of overhead: sell off portions of the business, layoffs, etc. They are all doing it regularly
with no impunity. US manufacturing is all but GONE. Its all been sold to PE firms that install
a puppet as the CEO, who then begins the extraction process of selling off parts of the business,
instating capital controls, and layoffs. Now it moved to retail. Eventually, America will be a
literal husk. Every place will just have the same options of a few fast food and retail chains.
The entire Midwest is already there, hence "Rust Belt". The only places that will be spared in
America will be the bubble of wealth concentrated on the coasts, but even these will begin to
whither as wealth starts to move to other, happier countries.
So in this milieu, put yourself in the place of a average HS educated American. You have two
options for your career: work your ass off and make next to nothing, or go to college and graduate
a debt-slave, also making next to nothing. However, a third option presents itself, complements
of the Welfare State: collect unemployment and have all the free time in the world. Then imagine
what you see and hear everyday. Banks illegally foreclosing on homes, executives getting away
with fraud in the hundreds of millions, a militarized police, potent pharmaceuticals given away
like candy, a plant that causes mild decrease in heart pressure illegalized, politicians lying
again and again, the wealthy talking on TV about how "easy" it is to open a business and selling
books about it, etc. It all concentrates down to the worst of all emotions: depression, self-loathing,
The depression comes from the hopelessness of most American's situation: poorly educated with
no future career, not even a path to take which will ensure a brighter future. The self-loathing
comes from the media, as most people get an HOURLY reminder of how shitty they look, how poor
they are. Even shows like Shameless don't touch on the reality of being poor in America. It isn't
a day to day struggle to pay bills. Its a day to day struggle to even feel worth something. To
feel part of society.
Then there's envy. You feel envious of the wealth, the attractiveness of others you see in
the media, which you misplace as being the vast majority of people in America because you see
them everyday and everywhere: online, on billboards, in movies, commercials, etc. You begin to
feel like SOMETHING should be given to you. The Government, fearing rebellion, realized this during
the last Great Depression when they began to expand the Welfare State. Welfare is a form of suppression.
It keeps people on the lowest rung just happy enough to forget about rebelling. Big Pharma is
a BIG factor in this as well. I've visited enough towns in the Mid West where everyone is on some
pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating
So in summary, the extraction of wealth by the upper class, (through "global" trade agreements,
stock market manipulation, tax evasion, offshoring, etc) along with lax regulation & prosecution
by the political body (they are very much one and the same these days) caused immense physical
(monetary) and mental depression/suppression of the masses, which are steadily moving toward Welfare
as it becomes the only of options with a glimmer of stability & free time.
Arizona Slim ,
June 21, 2016 at 8:55 am
So entire industries now eschew people older than 30 in favor of being staffed entirely
by 20 something's. This will surely end well.
June 21, 2016 at 11:06 am
I would like to see where all of these highly skilled and motivated 20-somethings are coming
from. Because I am not seeing them around here.
June 21, 2016 at 11:00 pm
They are bring these workers from India where starting IT salaries are $10,000/year. Check
early in the morning and late at night and you will see the buses delivering the workers who lived
crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living
in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened
with deportation if they complain, and in some cases, their families back home are physically
With the defeat of H-1B expansion, Obama has now vastly increased foreign guest workers through
executive actions that include:
- granting automatic work authorization to all H-1B spouses.
- expanding Bush's "Optional Practical Training" now allowing stem graduates to work for
years in the US on a student visa. The OPT has no caps, little labor protections,
and no salary requirement.
- lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their
foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse
such as foreign employees being paid $1.73/hour.
- modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu
of H-1B" which now allows some foreign workers to work in the US on the B-1 visa
There are now well over a million foreign guest workers in the US and the numbers are growing.
Curiously (ha ha!), DHS does not even keep count of the above admissions.
America, this is not YOUR government.
June 21, 2016 at 11:25 am
Wow, didn't know they expanded the student work permission to three years.
Used to be one year.
Essentially if you go to college here you have bought yourself a ticket
to live in America and take a job from an American.
June 21, 2016 at 11:51 am
I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees,
myself and another employee, were replaced. One employee who had worked there for 15 years and
was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible
June 22, 2016 at 4:36 pm
Oh, they're all out beating down the door over in Philadelphia to work as substitute teachers
for $75 per day. Just google 'substitute teacher shortage' and you'll see plenty of job opportunities.
June 21, 2016 at 8:14 am
Its called "turnover" and companies use it nowadays to suppress wages. Why pay a 30 yr old
85K when you can pay a 20 yr old 50k?
Most of the work is simple anyways, unless you work in the STEM field. And unfortunately, in
the STEM field, the largest industry (software) takes this approach to the next level.
June 21, 2016 at 9:08 am
Great post. Thanks.
fresno dan ,
June 21, 2016 at 8:17 am
Yes it is.
"supporting collective bargaining"
June 21, 2016 at 8:41 am
Incentives matter – if the end all and be all is GDP, you get GDP. TPP is an "industrial" policy,
or more accurately a re-distribution policy – yeah – re-distribution – the fact that it is re-distribution
from the poorer to the richer is a novel use of the concept, but we should never under estimate
the cleverness of Davos man.
The fact that it is espoused by those who incessantly yammer about how government policy should
be "neutral" exposes that these people are just making the rules for their own benefit. The fact
that so many laws ("reforms") must be instituted to advance this agenda just exposes the intellectual
dishonesty. Or would they have us believe that the advent of neoliberalism and the increase in
inequality is just a happy (sarc) coincidence? The idea that this is some unstoppable force of
nature just wants to make me puke.
If you think that work matters, that participation in society is important, and that a nation
is more than airbnb beds for Davos man conference attendees, you can have policies that punish
outsourcing, decide that limiting H4B workers increases demand for workers here with commensurate
increases in wages. There are a zillion ways the tax code as well as other laws are inimical to
US workers. It STARTS with the idea that paying labor more does NOT harm society….
These policies are not a function of physics or of God's will – they are made by men at the
behest of the few to reward the few. It can be changed if we choose to change it – although I
fear we are rapidly reaching a point, and may have already reached it, where we are a defacto
plutocracy and any "reform" is mere window dressing.
June 21, 2016 at 9:20 am
I agree with you wholeheartedly. We are on a straight path to plutocracy and I too fear we
have already passed the point of no return. I hear (read) daily the awful word, redistribution;
always in the context of taking a small amount away from the rich and powerful to give to those
not as fortunate; but never in the context of what is actually happening on a grand scale; the
taking from the lower classes and giving it to the upper 1% and above. When will it stop? I don't
know; I do know that unless we continue to try and make the masses actually understand what is
happening to them and to get them off their apathetic arses and involved in the political process,
thereby voting out of office the scrads of politicians devoted to and enamored of neoliberalism,
we will continue down this prophetic road of self destruction. It is our choice. It will be hard.
It may, in fact, already be too late. But, we have to try. We have to keep working; working to
explain the awful policies of neoliberalism.
June 21, 2016 at 9:52 am
Agreed. So what MUST the demand be ? Let the capitalist go after FULL AUTOMATION and balance
that with UNIVERSAL BASIC INCOME . Everything to do with money can be defined as a balance sheet
so this should be the balance sheet for the 21st Century . The demand should come from all . And
it's coming. I know the Swiss just rejected it , but the fact that they just called a referendum
to decide it ( for now ) tells us it's there in the ether and the Swiss are not alone ; the Dutch,
the Finns are all working on this . It's the genuine great leap forward.
June 21, 2016 at 11:59 am
sorry but basic income guarantee is simply creating demand for the plutocrats, and is exactly
why food stamps are in the agriculture budget. This is why the 13,000/yr BIG floated a week or
two ago already, at it's inception, takes 3,000 and puts it towards medical care-oops, i mean
insurance- you won't get care unless you pay extra, don't kid yourself. And this gravy train will
have as many cars attached to it as it can carry, how much will your BIG be in the form of food
stamps? rent subsidy? by the time it's implemented the person at the root of the issue won't get
a thin dime, but the cronies will have a basic income guarantee, the true purpose of this terrible
idea, I and others like me want things to do, not a snap card (more likely digital wallet brought
generously to you by apple and jp morgan, which of course will charge a fee, and conveniently
keep track of where you are at all times) that allows me to buy gmo food (yes, there will be foods
that are for the poor and foods for the rich, want organic? what's your net worth?) The silicon
valley parlors where these moronic ideas are hatched are filled with people who are trying to
cement their presence in the upper class which is funny on the meritocrat side because many of
my tech friends didn't go to college, they were good at video games and now it's robots robots
robots because that's their gravy train and the BIG is their lame ass apology, while getting some
demand into the economy to pay for their craptastic junk toys.
June 21, 2016 at 1:21 pm
Great observations about BIG. I never thought of it that way, and you make it very obvious.
June 21, 2016 at 4:03 pm
++ I have long been in favor of BIG but you point to the obvious strings that would be attached
if formulated by our Valley "disruptors".
June 21, 2016 at 8:10 pm
then instead provide the basics of life to people, like healthcare and shelter, rather than
money? That completely solves that problem doesn't it?
June 22, 2016 at 2:35 am
Excellent, my vote post of the week. The best answer is to pay people to actually work, the
work would be to pay them to undo the damage of the last 300 years of industrial revolution. We
had created a large middle middle class and secure working class destroying the planet, we can
create the same wealth cleaning it up. Instill hope on a dying planet, and for the first time
in its history give humanity a reason to get up in the morning other than just exploiting each
other in a rat race.
June 22, 2016 at 1:47 pm
One way of looking at how a BIG can be manipulated by owners is considering slavery. It seems
we are entering a new phase in the never ending capitalist struggle to secure cheep labor. Cheep
labor and resources are the driving force of the current system. The logical end result is to
have a self-sustaining labor force. One that makes just enough to survive and work- with little
room for anything else. That is where we are headed.
Advancing technology and the desire to shed costs related to slave upkeep can be argued as
important factors in slavery's demise in it's original social form as one individual owning another
as property. Why bother taking on the responsibility for slave upkeep when you can rig the system
in ways that require workers to enslave themselves to businesses and the system as a whole. You
need the labor power, not the person.
A BIG will be sold for all the typical humanitarian half-truths, but in reality is a natural
development to maintain the capitalist system. The powers that be have demonstrated no interest
in maintaining a middle class workforce. Debt bondage and BIG coercion are on the horizon.
As Goethe observed: None are more hopelessly enslaved than those who falsely believe they are
Fred Rucker ,
June 21, 2016 at 10:52 am
Your using an abstract moral excuse to argue against fulfilling a real actual need.Until the
revolution comes, BIG is a solution I will support.
Bill Smith ,
June 21, 2016 at 8:34 am
How wonderfully well stated, thank you
a different chris ,
June 21, 2016 at 9:02 am
Why does there have to be a political purpose for the release of the report? I would guess
that the end of a presidency works a little like late Friday afternoon when stuff get dumped to
the public at their point of lowest interest.
Raising the minimum wage works at cross purposes. It helps in the short run but in the longer
run – other things held constant – it makes automation more likely.
When the small company I worked for years ago was faced with replacing a piece of equipment,
at some point after the minimum wage had been raised, the company replaced it with one that was
more automated and took few people to operate. The cost of labor had moved up and cost of capital
was lower due the interest rates. The numbers were close enough that it could have gone either
way but the feeling was that the cost of labor would continue to go up. Going with the more automated
equipment locked in more of our costs.
Cry Shop ,
June 21, 2016 at 9:32 am
It's weird how people can pretend to conflate technology assisting labor with replacing labor
with cheaper labor, in order to derail the subject.
As far as your "point", they invented the nail and hammer and now we don't have to drill holes
and put pegs in. Fine. Nobody is talking about going technologically backwards, in fact just the
opposite. We are talking about the race to the bottom in labor itself. I suspect a bit of looking
around can find a lot of places where 1 American + 1 machine is slightly more expensive than 4
third-worlders + shipping + no machine. Sometimes the machines have progressed so fast that work
has moved back onshore (and funny that all the moaning about "helping people that live on 2cents/day"
isn't heard when that happens), which is cool but it still is the exception.
But: how limited is the number of "capitalists" that are going to bother to invest in bringing
down the cost of that machine when you can drive the cost of humans down in almost unlimited fashion?
- there are actually limits, and we will eventually hit them but it will get a lot uglier if we
do it that way.
Jay M ,
June 21, 2016 at 3:48 pm
And the whole issue is treating fellow human beings as less deserving, less worthy of employment
just because of their nationality.
There will always be that other half of the working class that can be used to kill the other
half when pushed hard enough, any definition will do for separating the class in to us vs them,
so that the war can start. Unions blew it when in the 1970s when their leadership sold out, refused
to go international with trade agreements, and focused on protecting an indefensible position,
indefensible from both an economics view and from an ethics view.
Bill Smith ,
June 21, 2016 at 11:41 am
During the cold war the American Labor union movement was thoroughly anti-communist and in
bed with the CIA as far coordinating with international labor. See wiki on Jay Lovestone for a
bit of the flavor of the times.
Steve Gunderson ,
June 21, 2016 at 5:12 pm
My point was that we ended up with one less minimum wage job because the cost of labor made
it better for the company to buy the more automated piece of equipment.
That example had nothing to do with off-shoring – though I now work in a company of about two
dozen people who has off-shored some work. I am going to guess about the equivalent of two full
I was quite surprised when that decision was made given our small size but it has worked as
explained to us when it started.
June 21, 2016 at 11:40 pm
How many things does the new machine buy?
June 21, 2016 at 9:26 am
Looked at that way, the machine buys it's consumables and raw material used in the process.
It would have done that anyway, were Bill's company to decide to buy a simpler machine and employ
one more person, but because of the automation, and as long as sales justify it, the more advanced
machine will process more raw material and use more consumables because it has the potential to
run 24 hours per day, whereas an employee would be seeing stars after an eight hour shift, due
to repetitious boring work.
June 21, 2016 at 9:58 am
Good point. Also consider litigation costs which to most employers in Ca at least is a huge
financial and management burder. A couple of worker's comp sore backs or knees combined with chiropractor,
"pain management doctors," surgeons, secondary psychic stress etc. makes a lot of employers including
me realize that every employee is a ticking liability time bomb just waiting to call that 1-800-hurt
at work number. No business can hire Americans in this legal environment unless they are very
well paid well beyond their value so they have no option but to do the job. In fact, in my business
litigation/medical/disability costs are far more significant than hourly wages. We just can't
take the risk and we outsource everything and hire as few as possible and I am not alone.. We
do everything possible to avoid hiring low level workers and when we do we want young recent immigrants
who are not "Americanized" and lawyer prone. Even then we get burned more often than not with
claims for age related conditions. Then it is simply 1-800-Lastimado en Trabajo and you can see
the ads all over the busses in TJ before they come over….ads for Ca worker's comp attorneys!!!!
Lawyers, since they control the democratic party are a huge part of our unemployment problem.
No employer can take the worker's comp risk of an older employee. If they feel back ache or knee
ache or neck ache on the job…it is "aggravated" and the employer is often out hundreds of thousands….thanks
to the lawyers who write the laws. Don't count on this lawyer in chief or the next one to do anything
about it. Age discrimination and automation and outsourcing are survival tactics for most of the
businesses I work with, including my own.
June 21, 2016 at 10:41 am
medicare for all
Steve Gunderson ,
June 21, 2016 at 5:13 pm
Yes indeed, there's a reason big business doesn't want medicare for all – it would result in
the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment
situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones.
But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable
workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps
at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs).
June 21, 2016 at 10:17 am
Thats pretty much how the movie/tv industry operates in Hollywood.
June 21, 2016 at 12:41 pm
Damn it, we could unleash potent forces if we just got rid of the lawyers. When a person's
knee gets torn up on the job, give em' a couple grand, an aspirin and tell them to get over it.
That's all you need to do.
Think about this. If the states weren't so desperate for money, they wouldn't have to run the
system on the cheap. If health costs were lowered, then the system wouldn't be so expensive. A
worker's comp agency has to balance its objectives between not bankrupting the state and not screwing
over hurt people. A hurt worker without an advocate is a sitting duck. One way to make lawyers
go away is to abolish worker's rights. Alternatively the worker's comp system would be cheaper
if health costs were cheaper, and realistic settlements without the assistance of a lawyer might
be possible if states had more revenue to pay bills.
June 21, 2016 at 8:57 pm
History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns
Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting
late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma
connection, and gave some rates of worsening of the diseases and hence points at which workers
could no longer work. The researchers and doctors were paid for and threatened into silence on
the findings, and required to ignore their Hippocratic obligations. Workers had to go to company
doctors, who would nurse them along until they were fired for inability.
At first, the court system's tort law provided the persistent with some compensation and support
commensurate with the harm. Many cases settled, but all contained non-disclosure mousetraps (tell
anyone and you lose everything.) And of course the "experts" who testified for both sides were
sworn to secrecy too, for money or from fear. But Manville and other corporate creatures got inspired,
starting around the 1890s I think, to pitch and successfully write (lobby) into law that "workers
comp" system that persists - places an administratively determined value on the "injury," percent
of disability, and the rest, bars tort litigation for WC-"covered" injuries. Even with all that,
a lawyer is often needed because the fokking corporate swine do everything in their considerable
power and corrupting reach to avoid even paying out the pittance WC provides, especially long-term
treatments and care for the many horrific injuries. Once again, the hope is that the injured worker
will GO DIE. And yes, there are cheaters, but gee, how surprising that the profits from fokking
over the workers so far outweigh the little bits that a few people scam from the other side. Many
of the patients I tried to help when I worked as a nurse were WC, and the treatment they got from
the insurers, and the "employee advocates" and "nurse case managers" and defense lawyers acting
on screw-the-worker policies of long standing, was amazingly cruel.
"Bankrupting the state?" WC is paid, far as I know, at least in FL, out of an insurance pool
that is funded by employers. Subject to the same kinds of actuarial calculations that any other
large-pool insurance game undertakes in underwriting. And yes, universal health care (not Obamacare)
would, if it could be managed without the full usual apparently inescapable corruption by neoliberal
interests and thinking, reduce EVERYONE's costs. And states are "desperate for money" largely
because the Chamber of Commerce and other neoliberal fokkers like the Kochs have strangled the
public general-welfare income stream and diverted most of what is left to various kinds of "white
man's welfare" and corporate gifts.
Here in FL, "worker's rights" are already largely abolished, and the mopping up continues.
Just so's you know. There are still lawyers who will (for a cut of the limited amounts that WC
will pay out if they finally prevail, to the worker's and family's detriment, "take cases." What
I learned in law school, first week in Contracts and Torts and Constitutional Law, is that "There
are no rights without effective remedies." What remedies do workers have?
And for those who want to shoot at the VA, on "inefficiency" grounds and the other neoliberal
overt and covert assaults, VA disability is a Workers Comp program too. Max payout for a GI who
is 100% permanently and totally disabled is around $30,000 a year. There is no component as with
other kinds of insurance structures for enhanced damages for "bad faith" on the part of the government
and the privatized functions that make up the disability administration. "Thank you for your service,
Sucker!!" And that "award" usually only comes after a decade or more of fighting with a well documented
opposition from the people who administer the "system" and requires persistence, luck, and occasionally
benefits (not so much any more) from intervention by the injured GI's elected representative…
June 21, 2016 at 1:03 pm
All this talk of workplace injury, lawyers and workers comp misses the obvious point that some
of these workplaces must be UNSAFE. (It's always the other workplace that's unsafe–"our" worker
comp payouts are always rorts).
The answer to all worker comp issues is the same: universal mandatory insurance run by the state
and work that minimises physical/psychological injury.
Naturally it won't occur as its a cost to business….
June 21, 2016 at 8:36 am
Heaven forbid employers pay for the body parts they use up and destroy in their workers.
I agree with Anon, universal health care would resolve a lot of these issues. When the cost
is spread out employers whine less when their workers are hurt.
June 21, 2016 at 9:56 am
Yet despite having among the most flexible labor markets in the OECD-with low levels of
labor market regulation and employment protections, a low minimum cost of labor, and low rates
of collective bargaining coverage-the United States has one of the lowest prime-age male labor
force participation rates of OECD member countries.
Francois Hollande to the white courtesy phone.
June 21, 2016 at 3:36 pm
This song was made in 1983…and the same crap that Run-DMC mention in the lyrics still exists
Unemployment at a record highs
People coming, people going, people born to die
Don't ask me, because I don't know why
But it's like that, and that's the way it is
People in the world tryin to make ends meet
You try to ride car, train, bus, or feet
I said you got to work hard, you want to compete
It's like that, and that's the way it is
Money is the key to end all your woes
Your ups, your downs, your highs and your lows
Won't you tell me the last time that love bought you clothes?
It's like that, and that's the way it is
Bills rise higher every day
We receive much lower pay
I'd rather stay young, go out and play
It's like that, and that's the way it is
Wars going on across the sea
Street soldiers killing the elderly
Whatever happened to unity?
It's like that, and that's the way it is
Enquiring Mind ,
June 21, 2016 at 9:56 am
I like old Ice-T.
The thing about being a man near the bottom in a country with low social mobility means it
is extremely hard to get girls. Jordan B Peterson said in The Age of Unequals discussion that
the primary motivation for men to become criminals is because it is the only way to have a chance
at attractive women. That has been my personal experience with crime too.
June 21, 2016 at 10:08 am
Ageism takes many forms, some more subtle than others. When your friendly local HR department
makes a few tweaks to benefits, the newer employees don't notice, but the wizened veterans take
notice. They see the handwriting earlier, and brace themselves for the next steps.
The HR folks are acting rationally in their supply-side worldview as they look out for shareholders
first and consider employees well down the list, if not at the bottom. That treatment of personnel
represents a policy of a very high effective discount rate on human capital in the aggregate.
When parsed out, there are a few nuances that make the picture clearer. When the top handful get
outsized payouts, they are incentivized to reinforce that high human capital discount rate, to
the detriment of those down range.
The graphics showed an acceleration in the ominous trends in the early and mid 1990s. That
coincided with the great outsourcing, re-engineeing, re-euphemising of jobs and the economy. In
that era, Fortune magazine published a series of articles about the changing nature of the social
contract at work.
One takeaway reflected the new bargain: companies needed to provide interesting work to retain
employees, and the latter had to continue to make themselves employable. Those veteran employees
referenced above discerned that there wasn't a bargain but a mandate to become more efficient,
all presented with the window dressing of so-called interesting work.
A more honest presentation would have said work that meets the interest or discount rate, as
part of the increasing financialization of the world. The decline in trust also accelerated during
that period, whether in companies or the media. We continue to reap the results of that widespread
mistrust and discontent during the current election cycle.
June 21, 2016 at 10:16 am
A result of blind Liberal/Conservative policies.
Denis Drew ,
June 21, 2016 at 10:59 am
a different Chris , please listen (see below) and read what Clayton Christensen has been saying.
Big companies are mostly brands now. Have offshored main parts of company. Last stage in that
development is decline of company, as in case of steel. IBM is presently also classic case as
on road to failure as well for same reason. It started at IBM with Gerstner.
Clayton Christensen: How Pursuit of Profits Kills Innovation and the U.S. Economy
Christensen at Gartner Symposium:
Gartner Symposium ITExpo
Oh and state/local gopvts favor large companies over small companies!
Why IBM Is In Decline
No end in sight for IBM decline as shares near six-year low
Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives
June 22, 2016 at 2:48 pm
In a labor market that contains for the sake of argument 50% rich country workers (e.g., American
raised) and 50% poor country workers (anywhere else raised) - must be something like Chicago which
is 40% white, 40% black, 20% Hispanic …
… where pay is set by what I call "subsistence-plus"; meaning set STARTING at the absolute minimum
pay workers will tolerate (e.g., $800/wk for American born taxi drivers, me; $400 for foreign
born) and then PLUS some more for each additional level of skill (bottom for McDonald's, more
for better English in Starbucks, more for college English and more competent organizing in Whole
instead of pay set by the highest price the consumer is willing to pay - by collective bargaining
or a minimum wage …
… a huge dropout of low skilled, rich country workers will occur as low skilled work pays much
below what rich country workers look at as "minimum subsistence" (the labor market will not clear).
E.g., American born taxi drivers (me again) and the Crips and the Bloods. How else explain that
100,000 out of my guesstimate 200,000 Chicago, gang-age males are in street gangs?
To make the psychological point about "minimum subsistence", today's rich county labor would
gladly work for half of today's poor country minimum - if it were 100 years ago and that's the
best a much less productive economy could pay. It's psychological, but a lot of psychological
if DNA immutable.
Now here's the wind-up - that should implant permanently the unquestionable need for collective
bargaining in all labor transactions: A what I call subsistence-plus labor market with
100% rich country workers will have lower pay levels than a collective bargaining labor market
with 50% rich/50% poor country workers.
That's the whole law and the profits about the need to make union busting a felony (starting
in progressive states) as far as I'm concerned.
PS. This is not an endorsement of Donald Trump's anti-immigration bender - that would kick
down the pillars that our whole civilization is built on (sorry Native Americans) - that could
mean 250 million Americans by 2050 instead of the anticipated 500 million. This IS an endorsement
or rebuilding high labor union density - the missing balance-of-power pillars of our civilization.
(Don't forget centralized bargaining - the "compleat" balance-of-power pillar of a unionized labor
nothing but the truth ,
June 21, 2016 at 11:33 am
David Simon covered this in "The Wire" and "Show me a Hero", you have entire sections of the
population that are forced to leave or participate in crime as a viable form of employment. We
have a surplus population now- and going forward that are not supporter by their labor or any
other resource other than transfer payments.
Please pause a moment and consider that concept. We have a paucity of credible jobs that people
can cobble together a living, let alone increase their opportunities going forward.
June 21, 2016 at 11:44 am
when everyone is trying to game the system no one has the right to cry morality.
i have some small businesses that i am selling off. Too many overhead, insurance and legal
costs. The line of business is becoming a slave to govt mandated costs and regulations. Customers
more interested in injury lawsuits. IQ and attitude of younger employees noticeably poor.
not looking good.
June 21, 2016 at 12:01 pm
"THE LONG-TERM DECLINE IN PRIME-AGE MALE LABOR FORCE PARTICIPATION" report states:
"Conventional economic theory posits that more 'flexible' labor markets-where it is easier
to hire and fire workers-facilitate matches between employers and individuals who want to work.
Yet despite having among the most flexible labor markets in the OECD-with low levels of labor
market regulation and employment protections, a low minimum cost of labor, and low rates of
collective bargaining coverage-the United States has one of the lowest prime-age male labor
force participation rates of OECD member countries."
I have been following this so-called "conventional economic theory" closely for nearly 20 years
now and can attest that it is not a theory but a hollow assertion. Empirical "evidence" for this
assertion is based on "strong priors": models containing assumptions that generate outcomes consistent
with the assertions. GIGO!
At the core of the flexible labour markets dogma is obeisance to the great god NAIRU, which
Jamie Galbraith exposed in all its Emperor's New Clothes nakedness 20 long years ago: "Time to
Ditch the NAIRU"
"The concept of a natural rate of unemployment, or non-accelerating inflation rate of unemployment
(NAIRU), remains controversial after twenty-five years. This essay presents a brief for no-confidence,
in four parts. First, the theoretical case for the natural rate is not compelling. Second,
the evidence for a vertical Phillips curve and the associated accelerationist hypothesis that
lowering unemployment past the NAIRU leads to unacceptable acceleration of inflation is weak.
Third, economists have failed to reach professional consensus on estimating the NAIRU. Fourth,
adherence to the concept as a guide to policy has major social costs but negligible benefits."
In "Unemployment: Macroeconomic Performance and the Labour Market" Richard Layard, Stephen
Nickell and Richard Jackman grafted the dubious NAIRU concept onto the anachronistic lump-of-labor
fallacy claim to create the hybrid chimera "LUMP-OF-OUTPUT FALLACY" in which central banks enforcing
NAIRU anti-inflation policy would ensure that you couldn't redistribute working time. You can't
make this stuff up. But Layard, Nickell and Jackman did. Nonsense on stilts.
"To many people, shorter working hours and early retirement appear to be common-sense solutions
for unemployment. But they are not, because they are not based on any coherent theory of what
determines unemployment. The only theory behind them is the lump-of-output theory: output is
a given. In this section we have shown that output is unlikely to remain constant."
This is simply not true. Shorter working hours is based on the same theory as the
theory of full employment fiscal policy. Keynes's theory. But don't take my word for it. In an
April 1945 letter to T.S. Eliot, Keynes wrote:
"The full employment policy by means of investment is only one particular application of
an intellectual theorem. You can produce the result just as well by consuming more or working
less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will
not do the trick. Less work is the ultimate solution."
Galbraith's "Time to Ditch NAIRU" has 293 citations on Google Scholar. Layard et al's "Unemployment"
has 5824. Economists flock to dogma like flies to shit.
June 21, 2016 at 12:30 pm
Old and in the way….
June 21, 2016 at 2:00 pm
The Oxycontin Report
June 21, 2016 at 2:10 pm
Some strong starting points without requiring additional govt interference:
Shut down both legal and illegal immigration. When you can not employ the ones who are here
why let more in.
Inforce the borders and deport people who are here illegally.
Get rid of anchor babies
Put tariffs on imports and I mean substantial tariffs. Worrying about Smoot Hawley is a canard.
At that time the US was the biggest exporter now we are the biggest importer. I would also have
a sliding scale depending upon labor rights. Some would scream we need to worry about the poor
in these countries. How about worrying about the poor in this country. It has reached the point
that you need to look around at your family and friends and say what would you do so that these
people prosper. If you are not willing to say practically anything legally then you will probably
Cut back govt at all levels. This is a major misallocation of resources. This is especially
true of the military industrial security area. Come up with new health care laws. Focus resources
to generate more doctors in the US and less people with unproductive degrees.
Close down overseas bases. Stop wars.
June 21, 2016 at 3:23 pm
One other thing, if you look at a lot of the jobs that men use to take and make a good living
it was construction, plumbing, gardening, janitorial, cooks and etc. All of these jobs have been
filled by illegal aliens who live 25 to a house, pay no taxes, get free health care and suppress
I know, I am a racist!
June 21, 2016 at 4:10 pm
Assuming there are enough natural resources, it is quite possible to arrange an economy in
a way that benefits the population of the recipient country. Think about it. The immigrants are
healthy, hardworking adults. So you get their labour without investing in twenty years of raising
them and then taking on the burden of those who are unhealthy or anti-social.
The US is an immigrant country with a weak safety net so an intelligent policy could easily
benefit both parties.
June 21, 2016 at 4:52 pm
With respect, if your givens were in the least interesting or useful to the greater good, rather
than articles of faith (which is just a polite term for self-delusion that benefits the power
structure) designed to benefit your imaginary friends, satisfy your need to dominate and abuse
others, and give your poor lonely misery some company, you might have something worth a detailed,
thoughtful response. As it is, I think you need to explain yourself a bit better.
June 21, 2016 at 5:52 pm
Seems very clear to me. You must have a low IQ if you need someone to explain it to you.
Illegal aliens generally do not pay taxes because they get paid with cash! Sorry, if they have
to pay such taxes like sales tax that everyone else needs to pay.
June 21, 2016 at 4:25 pm
"Stupid" is typical American conformist speak for "would offend my bosses".
You had two points that sounded reasonable: "Shut down both legal and illegal immigration.
When you can not employ the ones who are here why let more in." Because markets. Those who own
a government that was designed to be bought want to drive down the price and increase the availability
("flexibility") of all labor, of course. Plenty of Americans would be happy to work off the books
for a less demeaning wage under less demeaning conditions and less demeaning people. (As if Social
Security isn't going to be looted by the oligarchs by the time I'm of age to retire) They wouldn't
risk death and torture to come here if EMPLOYERS weren't withdrawing the benefits of employment
from those already here and offering those benefits to others. While stopping the influx would
be a fine idea, until you get control over those who are paying them to come here - making EMPLOYERS
into felons for any support of immigration violations would be a far, far more effective use of
enforcement power than beating down brown people at arm's length to satisfy your cultural conceits
- supply and demand works both ways.
And "Put tariffs on imports and I mean substantial tariffs" is in the right spirit, but fails
to acknowledge, with the usual hostility to self-awareness and past actions that defines the USAmerican
"mind", that other nations have just as much right to respond any way they feel like, and the
"trade agreements" the USA has signed grant them contractual grounds (pacta sunt servandum, remember?)
to respond disproportionately with their own tariffs, penalties against the USG, and other demerits
in the international sphere which are not constrained by your triumphalism in any way. Those means
would not be as effective as simply repudiating every multilateral "trade"-related agreement the
USA has ever signed and not, quite literally, pawning the USA for a mess of bourgeois pottage.
It's ridiculous that you should be depending on the US government to evaluate human rights
conditions, when human authorities are never bound by evidence unless they want to be. Malaysia's
admission into the TPP, and the politically-driven mulligan they received on their human rights
conditions, shows the utter folly of letting ambitious bourgeois careerists hide behind corporate
veils of any sort.
If you only believe that people who pay taxes should have rights, you support the very definition
of plutocracy, and that makes you a disease vector.
June 21, 2016 at 4:53 pm
"illegal aliens…pay no taxes, get free health care"
You have it back-a*ward. Undocumented workers pay taxes (FICA, SS, etc deductions), that they
will not receive when they reach old/SS age, even if they are in the US at that future time. There
is no "free health care" for undocumented workers, not eligible for Medicaid or ACA. Emergency
room service does not qualify as health care.
Even US citizens have to go through a bureaucratic nightmare to get & maintain Medicaid or
ACA, which is CRAPPY INSURANCE, not ACTUAL HEALTH CARE. At the point of needing actual health
care, USians are often denied the service or the insurance refuses to pay after the service is
done & face another bureaucratic nightmare in fighting the payment refusal. Undocumented workers
lack access to even this crapified level of "health coverage".
I do agree that increasing supply (H1-B for STEM pros, undocumented for HS-degreed workers)
lowers wages. Also, restricting supply (AMA restricting physician graduates such that US physicians
per capita lower than OECD levels) increases wages. Econ101 supply & demand, perhaps neoliberal
economists need "retraining" & should enroll in Econ101 at the local community college.
If there was an actual desire to limit undocumented immigration, the solution is large fines
on Illegal Employers. How about $100K per undocumented worker found. In addition, end the Drug
War, which causes violence & refugees, especially in Mexico & Central America. Revoke or at least
amend NAFTA to un-decimate the MEX agricultural industry.
Generally I have no problem wit