This is the first in a series of articles on the employment report, the job situation, the labor situation and the unbelievably pathetic political response. Check back in an hour or two.
Business people have been saying that down at the grass roots for a while now -- what Numerian says about interest rates. Not economists, just plain folk. Not based on anything but a gut feeling that the fundamentals are screwed up. IMO, as pointed out by Numerian and pretty obvious to everybody, banks need to be paying interest about 3%. Savings are key to a true monetarist system. Money supply should expand with -- not cause or be caused by -- explosions or implosions of the economy.
Having said that, it is a very good development to be getting away from the czarist approach to Federal government. You know, where the Fed Chair is, if not a demigod, at least a "czar". Got a problem? Appoint a Czar!
Since the Reagan administration, we have been watching this tendency toward glorification of political appointees in a bureaucracy that is dedicated to the well-being of itself and its members and generally subservient to corporate masters through the mechanism of corruption in national political machines.
NO NORE CZARS! For that matter, we need to end the imperial presidency ASAP!
Tyler Durden at ZeroHedge (1 September 2011) writes --
The crusade against High Frequency Trading which Zero Hedge started well over two years ago, is now coming to an end. Reuters reports that U.S. securities regulators have "taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes." As everyone knows, the only thing of value within the sub-penny scalping HFT universe are the odd nuances in computer code. Which is why its supreme and undisputed secrecy is sacrosanct.
Well, Ira ... and would "almost 100 years ago" indicate exactly 1913?
... and the "real reason behind" income taxes is .... ?
... and your position on the 16th Amendment is .... ?
... and you would recommend as an improvement .... what?
And "our true enemy" is .... ?
... and, since this is an economics site, could you 'compare and contrast' economic liberty, or civil liberty as resulting from economic policy, in the USA as those liberties existed before 1913 and after 1913?
I'm not saying that you don't have a point. It's just that I have to guess at what your point is. Or am I ignorant of the insider code?
Things don't have to be as bad as they are ... the economy is trying ... despite everything that corporate media, the Fed, Congress and the FIRE lobby, the military-industrial complex, the White House and the Supreme Court are doing to keep the country on a collision course with disaster.
As I look around me, I see what the charts are saying ... trends are maybe bottoming out ... or not ...
I wouldn't exactly take a 'bullish' view ... it still looks a lot like we are already in a period that could accurately be termed a Second Great Depression ...
But maybe it will be no more than a 'Depression Generation' ... the abandoned grandchildren of that most fortunate of generations, the Baby Boomers ...
It's just the way the cookie crumbles ... many of the grandchildren of the fortunate generation inherit the misfortune of being born at the wrong time ... similar to people and communities wiped out in a tsunami ... as though they had never existed ...
... on the other hand ... maybe the 'Depression Generation' will go on and on and on and on and on ... for half a century or more ... no employment prospects for young people ... whether you have graduated from wherever or not ...
... and meanwhile enforced early retirement for older working people ... only without any replacement income ... quickly draining their savings ... if any ...
QUESTION: At what point would that Depression-like situation equate the USA to a 'Third World' country?
I don't know the answer to that question. But, IMO the USA is not yet a 'Third World' country.
That's my tentative conclusion based on mortality reports for 2008-2009, the most recent years available. I am assuming that a Third World-ization trend would be clearly detectable in national mortality data.
Hunger vs. Death
On the other hand, the AARP has recently published (August 2011) the AARP Hunger Report. Using CPS data, the report makes findings about a category called "food insecurity" which is identifiable by responses to the 18-item Core Food Security Module (CFSM) questionnaire part of the CPS. The most pronounced increases in food insecurity are among 40-49 year olds, increasing "an astounding 68% between 2007-2009 compared to 38 percent (increase) for 50-59 year olds and 25% for those 60 and older. See, Executive Summary of the report -- available at DriveToEndHunger.org webpage --
http://www.drivetoendhunger.org/
According to the webpage, "8.8 million older adults face the risk of hunger." Coupled with the initials 'AARP', you might think that the issue is hunger among the 'senior' (retired) population. However, as is clear from the report, it's really a matter of unemployment and underemployment of pre-retirement American working people.
Food not Bombs vegan 'soup line', Sarasota, FL, 2007 (Wikimedia Commons, Creative Commons license). Taken (rescaled) from Wiki image file.
Question as to Third World-ization
The term 'Third World' is itself problematic. For one thing, there is no longer any 'Second World' since the dissolution of the USSR and the Eastern Bloc in Europe. (Cuba?) For another thing, the Eurocentric concept of a First World has hardly been applicable since before the end of the 20th Century.
What's more relevant is that the countries and territories that we would probably identify as 'Third World' are those characterized by deaths from famine and malnutrition, from warfare and other mega-disasters, from HIV-AIDS, from diarrheal diseases, cholera, other water-related diseases, other parasite-related diseases, malaria, dengue fever and tuberculosis -- as well as by deaths due to premature birth, low birth weight and other birth trauma or birth asphyxia, plus neonatal infections and other childhood diseases. Those, along with high birth ("fertility") rates, identify 'Third Worldliness' (so to speak).
None of those 'Third World' diseases or other causes of death can be found among the leading 15 causes of death in the USA, per CDC reports.
CDC Mortality Report
USA isn't even trending toward 'Third World' status, based on 2011 mortality report in 'National Vital Statistics Reports' series by CDC's Division of Vital Statistics. (This report is based on database for 2008 and 2009, most recent years considered to be 'available' for statistical purposes.)
What is clear is a continuing upward trend in life expectancy and, accordingly, a continuing downward trend in age-adjusted death rate. On the basis of these statistics, I would say that the USA has a ways to go before falling into the 'Third World' category.
Here's the distinction. Standing in soup lines is a clear sign of economic depression. But Third Worldliness or Third World-ization requires something more objective than answers on a questionnaire form. I'm saying we need to go to a body count to clearly break into 'Third World' territory.
According to the 2011 CDC mortality report --
The age-adjusted death rate decreased from 758.7 deaths per 100,000 population in 2008 to 741.0 deaths per 100,000 population in 2009. From 2008 to 2009, age-adjusted death rates decreased significantly for 10 of the 15 leading causes of death: Diseases of heart, Malignant neoplasms, Chronic lower respiratory diseases, Cerebrovascular diseases, Accidents (unintentional injuries), Alzheimer’s disease, Diabetes mellitus, Influenza and pneumonia, Septicemia, and Assault (homicide). Life expectancy increased by 0.2 year, from 78.0 in 2008 to 78.2 in 2009.
On the other hand, a trend toward increasing infant mortality is also continuing. That's a troubling and controversial issue.
Third World sub-population in USA?
On the issue of a sub-population living in 'Third World' conditions within the USA, CDC data isn't specifically helpful. There may be some relevance by way of a focus on minority racial populations, in particular, Black or African-American. There's also been a focus since Census 2000 on the population identified as 'Hispanic'.
There's less focus on what could be identified as the population of illegal immigrants, where the presumption probably is that the 'Hispanic' part of the illegal population would be the most impoverished, as would also be presumed for the illegal part of the Hispanic population. The problem for statistical analysis is that 'Hispanic' doesn't translate to 'illegal'. And 'illegal' doesn't translate to 'Hispanic' or Mexican.
Moreover, nobody really knows exactly what 'Hispanic' means. It's a political attempt to respond to a perceived political need arising from a political perception of identity politics (cultural determinism).
Mortality rate of Third World sub-population of illegals?
Death is a touchy thing for data collection, other than the basic body count, gender and some fairly accurate age data. It's even touchier for illegals, although there are probably some objective numbers available through records concerning transport of last remains back home.
Aside from the data collection problems, for mortality reports to have any meaning, you need to know the population of the living.
Suppose that for the illegal population, we had accurate counts both of the living and of those who died within the last year. Increases in the living population of illegals would indicate a comparatively non-Third World condition, at least, relative to Mexico. On the other hand, obviously a degree of Third World-ization will manifest. How would we identify the turning point, especially since the government makes data on foreign workers in the USA difficult to obtain? I am saying that, in line with the idea the dead bodies are the best and most objective measure o Third Worldliness (so to speak), then a marked increase in the mortality rate of illegals would probably indicate that turning point.
But we don't have any of that.
First general data collection problem -- counting the living
On major reason that the USA did not begin as a Third World nation is that the Founders decided to make accurate counts of every citizen and even of every slave. Eventually, that expanded to every resident including Native Americans. Third World countries cannot seriously count their population.
Trying to estimate the size of a Third World-ized sub-population involves counting homeless people and transients -- regardless of their native language or ability to speak English and whether they are citizens by birth or by naturalization ... or not citizens here or possibly anywhere else.
Putting numbers on the effects of economic depression involves the same issues ... counting the homeless and transients.
Putting numbers on how many people have 'dropped out' of the labor force without benefit of social security or other compensating income, generally 'laying low' ... that also involves the same issues ... counting the homeless and transients ...
How can you count people who 'don't count'?
The Census tries hard to figure it out, to count everybody within the national borders, but the Census is only every ten years. Also, the Census is probably having a hard time keeping up with dynamic changes.
Second general data collection problem -- identifying causes of death
Causes of death are a tricky thing always. In the USA there is a continuing trend toward underfunding, understaffing, undertraining and substandard work by county coroner offices. It's a national problem that has been noted by various professional organizations. It's one of the anecdotal reasons that can be stated as evidence that the USA is already a Third World country.
This is another topic, probably not suitable for an econometrics site like EP. More for a demographics site. Anyway --
What comes to mind is declining averages for wages, disposable income and so forth -- averages presumably reflecting an underlying reality that we call 'standard of living'. Of course, median figures or quartiles would probably be more descriptive than averages as indicators of a Third World condition. The problem with the 'standard of living' indicator is that it's been falling for a long time now. Where do we draw the line? Are we looking for a singularity in the curve of the second derivative, or what?
Probably a very good source of data is what has been pointed out by Robert Oak, namely, food stamp participation. The problem is that food stamp participation rates vary with official poverty level income and wealth cutoffs used in determining whether applicants are qualified or not. And that may vary from state to state!
Four indictors of 'Third Worldliness'
So there we are. Four indexes of Third Worldliness for the USA --
Decline in standard of living
Food stamp participation rate or other 'soup line' reports
Endemic unemployment
Body count (mortality statistics)
So far we are only at 3 out of 4. Probably a Great Depression, yes. But 'Third World'? Not yet anyway.
'Third World' would be a constant-zero standard of living.
'Third World' would be famine, at least in some regions and in some years.
'Third World' would be civil wars among sub-populations over jobs.
'Third World' would be a very different mortality picture, including deaths from starvation (that are definitely not suicide)
Why mortality data may be best indicator
The thing about mortality numbers is that they are pretty much definite beyond dispute, although causes of death are nowhere near as objective or reliable as may be thought. There are, in the USA, death certificates issued for almost all deaths. And there are official annual estimates of the total population, based on the most recent census.
Based on mortality reports, it doesn't seem reasonable, so far anyway, to think of the USA as having declined to 'Third World' status. This appears to be the case, even considering differences according to U. S. Census categories for 'race', including the trans-racial 'Hispanic' super-category that was first introduced in Census 2000.
Yes, there are significant, even substantial, differences between different 'racial' groups and for 'Hispanic' versus other categories ... but not enough to identify any USA sub-population as 'Third World', at least not yet.
There are rumors of a sub-population subsisting below the radar along the border with Mexico. That's actually been a real situation for a long time. But it's hard to count that sub-population and difficult to say whether it constitutes a 'Third World' sub-population within the USA, or not. Since this is a long-term trend, it's difficult to decide where to draw the line. Moreover, in the case of this particular long-term trend, it's difficult to collect the data through which a line could be drawn!
Even if had better numbers, as accurate as those in the EU, we wouldn't automatically have an indicator of Third Worldliness. As the EU clearly demonstrates, economic refugees fleeing the Third World do not Third World nations make -- unless, perhaps, there would someday be a case of a non-Third World country that abandoned its border control or was at the point of disintegration anyway. (The EU is a different case -- transnational integration, not national disintegration, at least not so far.)
_________
These 2011 reports are subject to adjustment since the stats are still based on estimates from Census 2000. So these demographics are, just like econometrics, subject to revision.
____________
"taxes on the first thousand dollars of savings bank interest… ought to be tax-exempt"
In the context of our current reality, this might not be a bad idea, but along with 1,000 other tweeks to the Tax Code, it does nothing to "fix" our problem. The complex set of rules comprising the Internal Revenue Code (USC Title 26) is nothing but a sophisticated distraction from the real issue that we're on a long descent from liberty inaugurated almost 100 years ago. The politicians, some naive, some complicit, cater to well funded interests, their influence for sale at a discount, while the people like bleating sheep are distracted by titillating and unimportant debates over taxing, spending, green energy (WTF?!), global warming, and whether or not athletes use "performance enhancing drugs".
If the American citizenry ever became aware of the true malfeasance of the conduct of our elected representatives as they open their boudoirs to the financial and other corporate interests, we'd be dangerous indeed, thus no expense is saved in keeping us pre-occupied and bickering with one another. Until we get smart and apply some discipline, our true enemy will remain in control over our very thoughts.
What does it mean that big money is buying up media and making their plays in campaign and related funds? It means that your vote and therefore your voice is worth money! Maybe you can't exactly invest that vote and expect returns ... but all the same ... if you must gamble, gamble wisely.
You may think this a political comment, but it's about the fundamentally economic topic of allocation of scarce resources. This truth applies not only to those who promote transparency but also to those who oppose it.
Congress and the White House
Off the top of my head, my 2¢ would be that those who are opposed to transparency generally are not likely to listen to any of us complaining about terminating the Statistical Abstract, but maybe that isn't the case. Maybe the real deal is that the Statistical Abstract is a bargaining chip.
We have to watch these tricky politicians, they may just be preparing another big bait-and-switch for the benefit of corporate media --
"me? oh yeah, I didn't want to end Freedom of Speech the way Obama did, but I did vote for the Statistical Abstract!" (Oh, thank you, thank you, thank you, oh congressional hero!)
OR
"me? oh yeah, they wouldn't let me support transparency, which was what I really wanted, but I did the best I could, I protected the Statistical Abstract!" (Oh, thank you, thank you, thank you, oh presidential hero!)
I have to ask the inconvenient question here
Without transparency, abstract of WHAT ???
The horrible truth is that not just legislation but the whole of electoral politics, at least at the national level, is sausage making. Every issue is ground up with every other issue.
It all goes into the same huge meat-grinder -- whatever Obama's jobs thing is, whatever 'prinicples' require the GOP House to oppose whatever the Obama jobs thing is, blustering about the treason of the Fed Board, the tease about the Statistical Abstract, the semi-signed EO to require some minimally sane disclosure regarding corrupt military contract practices, and of course, the three FTAs along with Trade Adjustment Assistance.
1. The Congress
In 2010, John Boehner (now Speaker of the House) was one of six Republican congressmen to vehemently oppose the DISCLOSE Act, which was enacted by a vote along party lines, 219-206. The intent and effect of the Act was to require corporations to disclose their political contributions and prevent foreign corporations from spending in US elections.
So, another inconvenient question is this: Do Republicans in Congress really give a rat's petunia about the Statistical Abstract? ... or is it a bargaining chip to be endangered and then "rescued" as transparency goes down the memory-hole of corporate media?
________________
2. The White House
As distinguished from the political issue of the Statistical Abstract, the general issue of transparency has much more to do with the White House here in 2011 than with the Congress, even though it's all thrown into the same huge meat-grinder of 'politics as usual' within 'the beltway'.
For those not yet up to speed, here's from the GlobalResearch article --
In 2011, there are two steps that President Obama can take now in 2011 to reduce the influence of secret donations in 2012.
Primarily, the President could -- and is reported to be considering -- an executive order that would require a company bidding for federal contracts to disclose all of its federal political spending over $5,000 for the previous two years, including money spent indirectly through third party organizations like the Chamber of Commerce. The proposed transparency order would create one central database on the website data.gov that would list the political activities of government contractors and their affiliates and officers.
There are undoubtedly a few (very few) congressional Republicans who truly understand and support the principle of disclosure ... but more than two dozen Republican senators plus House Majority Whip Kevin McCarthy and the chairmen of 19 House committees have signed letters to the president arguing that the proposed order would inject political favoritism into the contracting process! Congressional Republicans oppose disclosure as a matter of 'principle'! But what is the White House doing since last spring? What is happening to what was until recently the principle of transparency?
BTW: Yeah, I know, Obama has mortgaged his future to the bankers and other big sources of political donation and media influence ... AND the President seems incapable of grasping the undeniable import of demographic facts as they play into grim and unyielding econometric reality ... AT LEAST IN PART BECAUSE the President is irrationally pursuing a mirage-like vision of a big happy 'multicultural' world. I know!
BUT, as every business man has long understood,the only way to play a two-party system is to work both sides of the street against the middle. Those are the rules as things now stand. Hopefully, we can change the Money Party rules, but meanwhile, the rules are the rules. So, remember the golden rule, 'Do unto the sonsabeeatches before they do unto you!'
Save the Statistical Abstract, preserve the United States Census AND sign the petition and call the White House to go ahead and do it to the corporate a$$holes.
"Make the funds grants and sell small shares, similar to the VC set ups but this one has conditions. First the business must be in the U.S. and second it must be started by U.S. citizens, at least one and all founders must be U.S. citizens or permanent residents." -- Robert Oak (comment)
This piece I translated the computational complexity issue of a CDO to bloggerspeak.
This is the basic definition of the CDS derivative class and it's based on Copulas.
Before this site had LaTex installed, so now we can literally blog up mathematical proofs, I overviewed some issues in we want the formula.
Maybe it would be useful to take a look at the mathematics behind some of these sovereign CDSes and other CDOs. As far as I know nothing has changed, it's still allowing this 1 to many data mapping, which makes use of a Copula mathematically invalid.
I went through all of this over three years ago, so I have to refresh. I think I didn't go into the mathematics of it, figuring how many people even know ratios, never mind strange probability models, but maybe I should just write up the mathematics and go through every element, translate to bloggerspeak each element and ask why the hell billions of buckos are being bet on these monstrocities when it's clear they have contagion and "domino" built right into them by the mathematics themselves?
The major one, however, centers on the fundamental assumption behind options pricing, which is that a normal distribution is used to describe the statistical properties of prices for the underlying instruments. In the early days, this was already an issue for basic products like foreign exchange or interest rate options. The industry has tried work-arounds with fat-tail adjustments, which at least recognize the problem, but outside of the trading room it is not always clear that options valuations are not in any way "scientific", certainly not in the sense that statistics can offer reasonable predictive power in scientific disciplines like physics and chemistry.
Now extend this to instruments for which there is no rich statistical history, or sparse data points, such as an option on default events for countries or companies which at best can only be compared to data compiled over time for the US, and you begin to see how easy it is to take false comfort in a valuation for an instrument that can blow up at any time. S&P and Moody's can tell you a thing or two about assuming that events are uncorrelated and pose no significant risk. Things they thought were AAA risk in the US housing market were anything but that.
In reading through Duke's speech on financing for small business, I was struck by just how many small businesses are financing themselves through credit cards. Using credit cards, with their pathetic business terms, high interest rates and fees, as a cash flow management tool.
I have an idea. How about setting up some sort of new investment vehicle for investors to buy shares or something in that is akin to asking your Uncle Joe for $10k to invest in that bicycle shop you always wanted to start.
Akin to angel investors, or seed money. Create a host of tools that help small business, such as something to get these banks out of the credit card business for small business and give these people real lines of credit, ultra low interest at least.
Maybe some sort of specialized tax treatment, such as capital gains are tax free, losses can be written out forever and against anything or something to get Wall Street to pour money into the real economy instead of commodities futures and derivatives classes.
Make the funds grants and sell small shares, similar to the VC set ups but this one has conditions. First the business must be in the U.S. and second it must be started by U.S. citizens, at least one and all founders must be U.S. citizens or permanent residents.
That kicks out the glorified BPO industry from taking U.S. funds for labor arbitrage and cuts out the Chinese or Chinese manufacturing from getting funded and so on.
Then, they need incubators, tons of them. Incubators are places which offer resources, from systems to servers, to telecommunications to fax machines, and frankly the biggest thing an incubator can offer is expensive lab equipment, test equipment, prototyping services, manufacturing services and so on....
even a localized team of expertise to start these companies. There are so many experts in the U.S. right now that plain need a job, they could match up skills, experience and strategically hire experts and place them at these incubators as resources or to start forming their own startup.
I'm not kidding, the age discrimination in this country is so bad, you have tons of people, long term unemployed with accounting experience, marketing, engineering, sales, executive, management, manufacturing.....the list goes on and on.
So, they could hire these people and have them also impart their experience with others to formulate new businesses.
Just a thought but there are so many better ways to help Americans and thus the economy than what is always bantered about.
I wrote up a series of posts in 2008 on the mathematics and also overviewed some research results of computational complexity on CDSes, CDOs. These things, it's truly incredible, are in violation of mathematical properties. i.e. some of the "inputs" being used to their formula do not have the mathematical properties required by the mathematical model.
The idea of the Fed buying these fictional math machinations is scary beyond belief because CDSes (as everybody knows by now) are not bounded, 1:1.
I'm glad you mention derivatives for what's really going on in the markets generally isn't being written about post Dodd-Frank, which from what I've seen is simply a strainer of swiss cheese, doesn't nothing to ban some of these fictional mathematics.
I think some of these quants should be taken to task for not piping up. They must know some of these derivatives are mathematically invalid (or we have more PhDs getting paper because ????)
He got more inflation than he bargained for, and the worst kind of inflation. Now he has major Republican politicians on his case. This is dangerous for him personally if he wants to get renominated, and it's bad for the Fed's reputation. Add to that a bunch of Fed governors/presidents debunking his policies behind the scenes, and he certainly should show some public backtracking on Quantitative Easing. I don't think that means he has abandoned his life-long conviction that he knows what the Fed did wrong in the Depression and he is going to avoid doing that. But certainly some doubts may be forming in his mind as to the rightness of his actions. Several observers said his Jackson Hole speech had a tone of depression that was unusual for him.
CDSs and CDOs are potential tools to be used by the Fed to influence interest rates along parts of the yield curve. General interest rate futures and swaps could be used as well. There are some claims in the market that the Fed has already been doing this, behind the scenes. Anything is possible, but it is risky to build up a derivatives portfolio like that. You need traders experienced in managing gamma and higher-order derivative's risks. It would pretty quickly be known that the Fed has hired such a team, so that's why I doubt they have taken these steps.
I don't understand the relationship to CDSes and QE, beyond the indirect "pumping" of QE to prop up stock prices, evaluations and such.
I frankly think, reading the public speeches, Bernanke is not gun ho on QE, and wrote as much, pulling recent speech quotes, i.e. I think he's changed his mind since QE2. I think Bernnanke is pointing his finger at Congress, this administration and saying they need to enact effective stimulus, focus on employment.
How much of QE2 results ended up in foreign banks, indirectly?
That's to me the huge problem also is this bizarre policy that goes through Congress as well as the Fed that they should take care of the globe, usually at the expense of Americans.
So, I will take your insight to imply "Zandi" might be more on the money than his normal track record.
I read your site all of the time and it would be useful if you're aware, which/who are actually good at forecasting. I know I would read that intel.
On this site, I actually do number crunch to guesstimate GDP but just the next quarter and from the data. I have no awareness of what kind of prediction algorithms, methods these people utilize to predict economic metrics more than 1 year out.
I'm obviously no economist but if it is natural for the market to go up and down, and it is natural for the economy to go up and down and we truly live in a global economy then doing anything without some kind of global consensus ( IE: lets all to the same thing to limit both the down an the up swings ) is a fools game.
This is the first in a series of articles on the employment report, the job situation, the labor situation and the unbelievably pathetic political response. Check back in an hour or two.
What do these variables in RO's equation stand for?
No more csars!
Business people have been saying that down at the grass roots for a while now -- what Numerian says about interest rates. Not economists, just plain folk. Not based on anything but a gut feeling that the fundamentals are screwed up. IMO, as pointed out by Numerian and pretty obvious to everybody, banks need to be paying interest about 3%. Savings are key to a true monetarist system. Money supply should expand with -- not cause or be caused by -- explosions or implosions of the economy.
Having said that, it is a very good development to be getting away from the czarist approach to Federal government. You know, where the Fed Chair is, if not a demigod, at least a "czar". Got a problem? Appoint a Czar!
Since the Reagan administration, we have been watching this tendency toward glorification of political appointees in a bureaucracy that is dedicated to the well-being of itself and its members and generally subservient to corporate masters through the mechanism of corruption in national political machines.
NO NORE CZARS! For that matter, we need to end the imperial presidency ASAP!
Tyler Durden at ZeroHedge (1 September 2011) writes --
See link, column at left or --
ZeroHedge article (1 September 2011)
"These days a signal manufacturing is treading water is taken as a blessing" -- Robert Oak
A mixed blessing!
Well, Ira ... and would "almost 100 years ago" indicate exactly 1913?
... and the "real reason behind" income taxes is .... ?
... and your position on the 16th Amendment is .... ?
... and you would recommend as an improvement .... what?
And "our true enemy" is .... ?
... and, since this is an economics site, could you 'compare and contrast' economic liberty, or civil liberty as resulting from economic policy, in the USA as those liberties existed before 1913 and after 1913?
I'm not saying that you don't have a point. It's just that I have to guess at what your point is. Or am I ignorant of the insider code?
Things don't have to be as bad as they are ... the economy is trying ... despite everything that corporate media, the Fed, Congress and the FIRE lobby, the military-industrial complex, the White House and the Supreme Court are doing to keep the country on a collision course with disaster.
As I look around me, I see what the charts are saying ... trends are maybe bottoming out ... or not ...
I wouldn't exactly take a 'bullish' view ... it still looks a lot like we are already in a period that could accurately be termed a Second Great Depression ...
But maybe it will be no more than a 'Depression Generation' ... the abandoned grandchildren of that most fortunate of generations, the Baby Boomers ...
It's just the way the cookie crumbles ... many of the grandchildren of the fortunate generation inherit the misfortune of being born at the wrong time ... similar to people and communities wiped out in a tsunami ... as though they had never existed ...
... on the other hand ... maybe the 'Depression Generation' will go on and on and on and on and on ... for half a century or more ... no employment prospects for young people ... whether you have graduated from wherever or not ...
... and meanwhile enforced early retirement for older working people ... only without any replacement income ... quickly draining their savings ... if any ...
QUESTION: At what point would that Depression-like situation equate the USA to a 'Third World' country?
I don't know the answer to that question. But, IMO the USA is not yet a 'Third World' country.
That's my tentative conclusion based on mortality reports for 2008-2009, the most recent years available. I am assuming that a Third World-ization trend would be clearly detectable in national mortality data.
Hunger vs. Death
On the other hand, the AARP has recently published (August 2011) the AARP Hunger Report. Using CPS data, the report makes findings about a category called "food insecurity" which is identifiable by responses to the 18-item Core Food Security Module (CFSM) questionnaire part of the CPS. The most pronounced increases in food insecurity are among 40-49 year olds, increasing "an astounding 68% between 2007-2009 compared to 38 percent (increase) for 50-59 year olds and 25% for those 60 and older. See, Executive Summary of the report -- available at DriveToEndHunger.org webpage --
http://www.drivetoendhunger.org/
According to the webpage, "8.8 million older adults face the risk of hunger." Coupled with the initials 'AARP', you might think that the issue is hunger among the 'senior' (retired) population. However, as is clear from the report, it's really a matter of unemployment and underemployment of pre-retirement American working people.
Food not Bombs vegan 'soup line', Sarasota, FL, 2007 (Wikimedia Commons, Creative Commons license). Taken (rescaled) from Wiki image file.
Question as to Third World-ization
The term 'Third World' is itself problematic. For one thing, there is no longer any 'Second World' since the dissolution of the USSR and the Eastern Bloc in Europe. (Cuba?) For another thing, the Eurocentric concept of a First World has hardly been applicable since before the end of the 20th Century.
What's more relevant is that the countries and territories that we would probably identify as 'Third World' are those characterized by deaths from famine and malnutrition, from warfare and other mega-disasters, from HIV-AIDS, from diarrheal diseases, cholera, other water-related diseases, other parasite-related diseases, malaria, dengue fever and tuberculosis -- as well as by deaths due to premature birth, low birth weight and other birth trauma or birth asphyxia, plus neonatal infections and other childhood diseases. Those, along with high birth ("fertility") rates, identify 'Third Worldliness' (so to speak).
None of those 'Third World' diseases or other causes of death can be found among the leading 15 causes of death in the USA, per CDC reports.
CDC Mortality Report
USA isn't even trending toward 'Third World' status, based on 2011 mortality report in 'National Vital Statistics Reports' series by CDC's Division of Vital Statistics. (This report is based on database for 2008 and 2009, most recent years considered to be 'available' for statistical purposes.)
What is clear is a continuing upward trend in life expectancy and, accordingly, a continuing downward trend in age-adjusted death rate. On the basis of these statistics, I would say that the USA has a ways to go before falling into the 'Third World' category.
Here's the distinction. Standing in soup lines is a clear sign of economic depression. But Third Worldliness or Third World-ization requires something more objective than answers on a questionnaire form. I'm saying we need to go to a body count to clearly break into 'Third World' territory.
According to the 2011 CDC mortality report --
On the other hand, a trend toward increasing infant mortality is also continuing. That's a troubling and controversial issue.
Third World sub-population in USA?
On the issue of a sub-population living in 'Third World' conditions within the USA, CDC data isn't specifically helpful. There may be some relevance by way of a focus on minority racial populations, in particular, Black or African-American. There's also been a focus since Census 2000 on the population identified as 'Hispanic'.
There's less focus on what could be identified as the population of illegal immigrants, where the presumption probably is that the 'Hispanic' part of the illegal population would be the most impoverished, as would also be presumed for the illegal part of the Hispanic population. The problem for statistical analysis is that 'Hispanic' doesn't translate to 'illegal'. And 'illegal' doesn't translate to 'Hispanic' or Mexican.
Moreover, nobody really knows exactly what 'Hispanic' means. It's a political attempt to respond to a perceived political need arising from a political perception of identity politics (cultural determinism).
Mortality rate of Third World sub-population of illegals?
Death is a touchy thing for data collection, other than the basic body count, gender and some fairly accurate age data. It's even touchier for illegals, although there are probably some objective numbers available through records concerning transport of last remains back home.
Aside from the data collection problems, for mortality reports to have any meaning, you need to know the population of the living.
Suppose that for the illegal population, we had accurate counts both of the living and of those who died within the last year. Increases in the living population of illegals would indicate a comparatively non-Third World condition, at least, relative to Mexico. On the other hand, obviously a degree of Third World-ization will manifest. How would we identify the turning point, especially since the government makes data on foreign workers in the USA difficult to obtain? I am saying that, in line with the idea the dead bodies are the best and most objective measure o Third Worldliness (so to speak), then a marked increase in the mortality rate of illegals would probably indicate that turning point.
But we don't have any of that.
First general data collection problem -- counting the living
On major reason that the USA did not begin as a Third World nation is that the Founders decided to make accurate counts of every citizen and even of every slave. Eventually, that expanded to every resident including Native Americans. Third World countries cannot seriously count their population.
Trying to estimate the size of a Third World-ized sub-population involves counting homeless people and transients -- regardless of their native language or ability to speak English and whether they are citizens by birth or by naturalization ... or not citizens here or possibly anywhere else.
Putting numbers on the effects of economic depression involves the same issues ... counting the homeless and transients.
Putting numbers on how many people have 'dropped out' of the labor force without benefit of social security or other compensating income, generally 'laying low' ... that also involves the same issues ... counting the homeless and transients ...
How can you count people who 'don't count'?
The Census tries hard to figure it out, to count everybody within the national borders, but the Census is only every ten years. Also, the Census is probably having a hard time keeping up with dynamic changes.
Second general data collection problem -- identifying causes of death
Causes of death are a tricky thing always. In the USA there is a continuing trend toward underfunding, understaffing, undertraining and substandard work by county coroner offices. It's a national problem that has been noted by various professional organizations. It's one of the anecdotal reasons that can be stated as evidence that the USA is already a Third World country.
This is another topic, probably not suitable for an econometrics site like EP. More for a demographics site. Anyway --
See, PBS-Pro Publica report, The Real CSI - How America's Patchwork System of Death Investigation Puts the Living at Risk
Two other indicators of 'Third Worldliness'
What comes to mind is declining averages for wages, disposable income and so forth -- averages presumably reflecting an underlying reality that we call 'standard of living'. Of course, median figures or quartiles would probably be more descriptive than averages as indicators of a Third World condition. The problem with the 'standard of living' indicator is that it's been falling for a long time now. Where do we draw the line? Are we looking for a singularity in the curve of the second derivative, or what?
Probably a very good source of data is what has been pointed out by Robert Oak, namely, food stamp participation. The problem is that food stamp participation rates vary with official poverty level income and wealth cutoffs used in determining whether applicants are qualified or not. And that may vary from state to state!
Four indictors of 'Third Worldliness'
So there we are. Four indexes of Third Worldliness for the USA --
So far we are only at 3 out of 4. Probably a Great Depression, yes. But 'Third World'? Not yet anyway.
Why mortality data may be best indicator
The thing about mortality numbers is that they are pretty much definite beyond dispute, although causes of death are nowhere near as objective or reliable as may be thought. There are, in the USA, death certificates issued for almost all deaths. And there are official annual estimates of the total population, based on the most recent census.
Based on mortality reports, it doesn't seem reasonable, so far anyway, to think of the USA as having declined to 'Third World' status. This appears to be the case, even considering differences according to U. S. Census categories for 'race', including the trans-racial 'Hispanic' super-category that was first introduced in Census 2000.
Yes, there are significant, even substantial, differences between different 'racial' groups and for 'Hispanic' versus other categories ... but not enough to identify any USA sub-population as 'Third World', at least not yet.
There are rumors of a sub-population subsisting below the radar along the border with Mexico. That's actually been a real situation for a long time. But it's hard to count that sub-population and difficult to say whether it constitutes a 'Third World' sub-population within the USA, or not. Since this is a long-term trend, it's difficult to decide where to draw the line. Moreover, in the case of this particular long-term trend, it's difficult to collect the data through which a line could be drawn!
Even if had better numbers, as accurate as those in the EU, we wouldn't automatically have an indicator of Third Worldliness. As the EU clearly demonstrates, economic refugees fleeing the Third World do not Third World nations make -- unless, perhaps, there would someday be a case of a non-Third World country that abandoned its border control or was at the point of disintegration anyway. (The EU is a different case -- transnational integration, not national disintegration, at least not so far.)
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These 2011 reports are subject to adjustment since the stats are still based on estimates from Census 2000. So these demographics are, just like econometrics, subject to revision.
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[Links tested and functioning, 1 September 2011.]
"taxes on the first thousand dollars of savings bank interest… ought to be tax-exempt"
In the context of our current reality, this might not be a bad idea, but along with 1,000 other tweeks to the Tax Code, it does nothing to "fix" our problem. The complex set of rules comprising the Internal Revenue Code (USC Title 26) is nothing but a sophisticated distraction from the real issue that we're on a long descent from liberty inaugurated almost 100 years ago. The politicians, some naive, some complicit, cater to well funded interests, their influence for sale at a discount, while the people like bleating sheep are distracted by titillating and unimportant debates over taxing, spending, green energy (WTF?!), global warming, and whether or not athletes use "performance enhancing drugs".
If the American citizenry ever became aware of the true malfeasance of the conduct of our elected representatives as they open their boudoirs to the financial and other corporate interests, we'd be dangerous indeed, thus no expense is saved in keeping us pre-occupied and bickering with one another. Until we get smart and apply some discipline, our true enemy will remain in control over our very thoughts.
"I do not know who to raise hell about this with, the SEC, the administration, your congress rep. ... " -- Robert Oak
Sign the petition to the President to support the principle of transparency!
What does it mean that big money is buying up media and making their plays in campaign and related funds? It means that your vote and therefore your voice is worth money! Maybe you can't exactly invest that vote and expect returns ... but all the same ... if you must gamble, gamble wisely.
You may think this a political comment, but it's about the fundamentally economic topic of allocation of scarce resources. This truth applies not only to those who promote transparency but also to those who oppose it.
Congress and the White House
Off the top of my head, my 2¢ would be that those who are opposed to transparency generally are not likely to listen to any of us complaining about terminating the Statistical Abstract, but maybe that isn't the case. Maybe the real deal is that the Statistical Abstract is a bargaining chip.
We have to watch these tricky politicians, they may just be preparing another big bait-and-switch for the benefit of corporate media --
"me? oh yeah, I didn't want to end Freedom of Speech the way Obama did, but I did vote for the Statistical Abstract!" (Oh, thank you, thank you, thank you, oh congressional hero!)
OR
"me? oh yeah, they wouldn't let me support transparency, which was what I really wanted, but I did the best I could, I protected the Statistical Abstract!" (Oh, thank you, thank you, thank you, oh presidential hero!)
I have to ask the inconvenient question here
Without transparency, abstract of WHAT ???
The horrible truth is that not just legislation but the whole of electoral politics, at least at the national level, is sausage making. Every issue is ground up with every other issue.
It all goes into the same huge meat-grinder -- whatever Obama's jobs thing is, whatever 'prinicples' require the GOP House to oppose whatever the Obama jobs thing is, blustering about the treason of the Fed Board, the tease about the Statistical Abstract, the semi-signed EO to require some minimally sane disclosure regarding corrupt military contract practices, and of course, the three FTAs along with Trade Adjustment Assistance.
1. The Congress
In 2010, John Boehner (now Speaker of the House) was one of six Republican congressmen to vehemently oppose the DISCLOSE Act, which was enacted by a vote along party lines, 219-206. The intent and effect of the Act was to require corporations to disclose their political contributions and prevent foreign corporations from spending in US elections.
See, Congressional Digest (September 2010)
So, another inconvenient question is this: Do Republicans in Congress really give a rat's petunia about the Statistical Abstract? ... or is it a bargaining chip to be endangered and then "rescued" as transparency goes down the memory-hole of corporate media?
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2. The White House
As distinguished from the political issue of the Statistical Abstract, the general issue of transparency has much more to do with the White House here in 2011 than with the Congress, even though it's all thrown into the same huge meat-grinder of 'politics as usual' within 'the beltway'.
See, 'Corporate Donations and the 2012 Presidential Elections' (10 May 2011) at GlobalResearch.ca, website of the Montreal-based Centre for Research on Globalisation (CRG), an independent research and media organization.
And see, good old Mother Jones, 8 July 2011
And see, GovernmentExecutive.com, 11 August 2011, 'White House still reviewing plan for disclosing contractor campaign gifts'
For those not yet up to speed, here's from the GlobalResearch article --
There are undoubtedly a few (very few) congressional Republicans who truly understand and support the principle of disclosure ... but more than two dozen Republican senators plus House Majority Whip Kevin McCarthy and the chairmen of 19 House committees have signed letters to the president arguing that the proposed order would inject political favoritism into the contracting process! Congressional Republicans oppose disclosure as a matter of 'principle'! But what is the White House doing since last spring? What is happening to what was until recently the principle of transparency?
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I am NOT saying don't even bother to press your congress critturs to retain the Statistical Abstract. I am NOT saying don't even bother to sign PublicCitizen's petition to the White House, 'President Obama, Stand Up to the U.S. Chamber and Fight for Disclosure!'
I'm saying:
Sign the petition supporting the principle of transparency! Call your congress critturs tomorrow! Call the White House!
Freedom -- use it of lose it!
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BTW: Yeah, I know, Obama has mortgaged his future to the bankers and other big sources of political donation and media influence ... AND the President seems incapable of grasping the undeniable import of demographic facts as they play into grim and unyielding econometric reality ... AT LEAST IN PART BECAUSE the President is irrationally pursuing a mirage-like vision of a big happy 'multicultural' world. I know!
BUT, as every business man has long understood, the only way to play a two-party system is to work both sides of the street against the middle. Those are the rules as things now stand. Hopefully, we can change the Money Party rules, but meanwhile, the rules are the rules. So, remember the golden rule, 'Do unto the sonsabeeatches before they do unto you!'
Save the Statistical Abstract, preserve the United States Census AND sign the petition and call the White House to go ahead and do it to the corporate a$$holes.
[All links tested as of time of posting.]
"Make the funds grants and sell small shares, similar to the VC set ups but this one has conditions. First the business must be in the U.S. and second it must be started by U.S. citizens, at least one and all founders must be U.S. citizens or permanent residents." -- Robert Oak (comment)
But what would the WTO say?
way cool discussion here!
This piece I translated the computational complexity issue of a CDO to bloggerspeak.
This is the basic definition of the CDS derivative class and it's based on Copulas.
Before this site had LaTex installed, so now we can literally blog up mathematical proofs, I overviewed some issues in we want the formula.
Maybe it would be useful to take a look at the mathematics behind some of these sovereign CDSes and other CDOs. As far as I know nothing has changed, it's still allowing this 1 to many data mapping, which makes use of a Copula mathematically invalid.
I went through all of this over three years ago, so I have to refresh. I think I didn't go into the mathematics of it, figuring how many people even know ratios, never mind strange probability models, but maybe I should just write up the mathematics and go through every element, translate to bloggerspeak each element and ask why the hell billions of buckos are being bet on these monstrocities when it's clear they have contagion and "domino" built right into them by the mathematics themselves?
The major one, however, centers on the fundamental assumption behind options pricing, which is that a normal distribution is used to describe the statistical properties of prices for the underlying instruments. In the early days, this was already an issue for basic products like foreign exchange or interest rate options. The industry has tried work-arounds with fat-tail adjustments, which at least recognize the problem, but outside of the trading room it is not always clear that options valuations are not in any way "scientific", certainly not in the sense that statistics can offer reasonable predictive power in scientific disciplines like physics and chemistry.
Now extend this to instruments for which there is no rich statistical history, or sparse data points, such as an option on default events for countries or companies which at best can only be compared to data compiled over time for the US, and you begin to see how easy it is to take false comfort in a valuation for an instrument that can blow up at any time. S&P and Moody's can tell you a thing or two about assuming that events are uncorrelated and pose no significant risk. Things they thought were AAA risk in the US housing market were anything but that.
In reading through Duke's speech on financing for small business, I was struck by just how many small businesses are financing themselves through credit cards. Using credit cards, with their pathetic business terms, high interest rates and fees, as a cash flow management tool.
I have an idea. How about setting up some sort of new investment vehicle for investors to buy shares or something in that is akin to asking your Uncle Joe for $10k to invest in that bicycle shop you always wanted to start.
Akin to angel investors, or seed money. Create a host of tools that help small business, such as something to get these banks out of the credit card business for small business and give these people real lines of credit, ultra low interest at least.
Maybe some sort of specialized tax treatment, such as capital gains are tax free, losses can be written out forever and against anything or something to get Wall Street to pour money into the real economy instead of commodities futures and derivatives classes.
Make the funds grants and sell small shares, similar to the VC set ups but this one has conditions. First the business must be in the U.S. and second it must be started by U.S. citizens, at least one and all founders must be U.S. citizens or permanent residents.
That kicks out the glorified BPO industry from taking U.S. funds for labor arbitrage and cuts out the Chinese or Chinese manufacturing from getting funded and so on.
Then, they need incubators, tons of them. Incubators are places which offer resources, from systems to servers, to telecommunications to fax machines, and frankly the biggest thing an incubator can offer is expensive lab equipment, test equipment, prototyping services, manufacturing services and so on....
even a localized team of expertise to start these companies. There are so many experts in the U.S. right now that plain need a job, they could match up skills, experience and strategically hire experts and place them at these incubators as resources or to start forming their own startup.
I'm not kidding, the age discrimination in this country is so bad, you have tons of people, long term unemployed with accounting experience, marketing, engineering, sales, executive, management, manufacturing.....the list goes on and on.
So, they could hire these people and have them also impart their experience with others to formulate new businesses.
Just a thought but there are so many better ways to help Americans and thus the economy than what is always bantered about.
I wrote up a series of posts in 2008 on the mathematics and also overviewed some research results of computational complexity on CDSes, CDOs. These things, it's truly incredible, are in violation of mathematical properties. i.e. some of the "inputs" being used to their formula do not have the mathematical properties required by the mathematical model.
The idea of the Fed buying these fictional math machinations is scary beyond belief because CDSes (as everybody knows by now) are not bounded, 1:1.
I'm glad you mention derivatives for what's really going on in the markets generally isn't being written about post Dodd-Frank, which from what I've seen is simply a strainer of swiss cheese, doesn't nothing to ban some of these fictional mathematics.
I think some of these quants should be taken to task for not piping up. They must know some of these derivatives are mathematically invalid (or we have more PhDs getting paper because ????)
He got more inflation than he bargained for, and the worst kind of inflation. Now he has major Republican politicians on his case. This is dangerous for him personally if he wants to get renominated, and it's bad for the Fed's reputation. Add to that a bunch of Fed governors/presidents debunking his policies behind the scenes, and he certainly should show some public backtracking on Quantitative Easing. I don't think that means he has abandoned his life-long conviction that he knows what the Fed did wrong in the Depression and he is going to avoid doing that. But certainly some doubts may be forming in his mind as to the rightness of his actions. Several observers said his Jackson Hole speech had a tone of depression that was unusual for him.
CDSs and CDOs are potential tools to be used by the Fed to influence interest rates along parts of the yield curve. General interest rate futures and swaps could be used as well. There are some claims in the market that the Fed has already been doing this, behind the scenes. Anything is possible, but it is risky to build up a derivatives portfolio like that. You need traders experienced in managing gamma and higher-order derivative's risks. It would pretty quickly be known that the Fed has hired such a team, so that's why I doubt they have taken these steps.
I don't understand the relationship to CDSes and QE, beyond the indirect "pumping" of QE to prop up stock prices, evaluations and such.
I frankly think, reading the public speeches, Bernanke is not gun ho on QE, and wrote as much, pulling recent speech quotes, i.e. I think he's changed his mind since QE2. I think Bernnanke is pointing his finger at Congress, this administration and saying they need to enact effective stimulus, focus on employment.
How much of QE2 results ended up in foreign banks, indirectly?
That's to me the huge problem also is this bizarre policy that goes through Congress as well as the Fed that they should take care of the globe, usually at the expense of Americans.
So, I will take your insight to imply "Zandi" might be more on the money than his normal track record.
I read your site all of the time and it would be useful if you're aware, which/who are actually good at forecasting. I know I would read that intel.
On this site, I actually do number crunch to guesstimate GDP but just the next quarter and from the data. I have no awareness of what kind of prediction algorithms, methods these people utilize to predict economic metrics more than 1 year out.
I'm obviously no economist but if it is natural for the market to go up and down, and it is natural for the economy to go up and down and we truly live in a global economy then doing anything without some kind of global consensus ( IE: lets all to the same thing to limit both the down an the up swings ) is a fools game.
Democrats' answer to Supply Side Economics is ... what ... Demand side?
How about we do something else.
And ... if we are in to leaking what we want people to do ... how about we tell them to be prudent and limit risk to that which is manageable.
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