Thank God That Awful Election is Over

"Welcome back," I say to myself as I sit down to write my first post in a few months. The reason for my absence is that the US election has been dominating the news for so long that there hasn't been much substantive news for me to be angry about. See, when I need inspiration for posting here, I go to my favorite news sites and wait for the idiocy and pig-ignorance to wash over me until I'm hopping mad about something. It usually takes the form of some article pontificating on a problem whose solution or answer seems obvious to me. Favorites have been why birthrates have been falling, why our economies have been stagnating and similar topics. The problem I have during an election cycle is that there is so much low hanging fruit (of the ignorance and stupidity variety) and so much hyperbole and histrionics that it isn't fun to point out how dumb most of it is. In case you haven't noticed, politicians lie, cheat and steal in order to get into office and then ignore all the promises they made (at least to the voting public, if not their donors list) while trying to get into office. This makes every debate, every speech and all that political spectacle pointless. Your best bet, as a voter, is to do a little research ahead of time about party affiliation and candidates' stated positions on the issues and then hope for the best. But watching the two year presidential election cycle like some sort of god-awful reality tv show is just an exercise in masochism. So, now that it's over, I will try to find more substantive stories in the news to be angry about so that I can write illuminating posts.

If you are at all wondering about my personal politics, I didn't like either of the two mainstream candidates and didn't vote for either of them. If it wasn't for my state and local elections, I wouldn't have bothered going to the polls. But state and local elections matter and have far greater impact on our daily lives than their low voter turnout implies they do, so I felt it was important to put in my two cents despite the garbage headliners. But beyond that, I wont waste any space on the internet adding to the plethora of articles pooping on Hillary and the Donald. It's been done to absolute death and at this point I'm not sure there's much more to say. I'll leave the continuing idiocy to other news sources who are far more experienced with histrionics than yours truly.

I don't know about you, but I am truly looking forward to the day that I open the front page of a newspaper and see that it contains no new stories about either of the candidates for president. It will be a small breath of fresh air in a stale and tired news cycle.

The Federal Reserve Failure

Today marks the beginning of the annual meeting of central bankers in Jackson Hole Wyoming. The central bankers of the world meet annually here to discuss their shared mission of ensuring that the world's financial markets continue to fuel economic growth around the world. Unfortunately, they are confronted with the same problem they have all faced since the great recession "ended", namely that they are seemingly incapable of achieving their missions. With persistently low inflation, low labor participation rates and slow economic growth from the entire first world, it is undeniable that the central banks of the world have failed to achieve their shared goal of persistent economic growth. Numerous newspapers around the world have taken the opportunity this meeting presents to opine on why this is and what should be done about it. Once article in particular struck me though; it's an opinion piece in the Wall Street Journal by a former member of the Federal Reserve board who has turned academic. Here's the Link . I encourage you to read the piece because I think it has some very prescient ideas about how the US Fed system needs to change.

What got a bee in my bonnet about the above linked article though was the repetition of the sentiment that academics and central bankers are confused as to why we have slow growth in the first world. Now, I've talked about this before Link , but the reason we have slow growth is anything but a mystery. We have strangled growth with high taxes, vast and expensive regulatory states, vast debts (both at a government level and at an individual level) and laws that encourage multinationals invest in the developing world while stymieing growth of small business back home. At this point, the continued complaint feels a lot like the famous Simpsons quote: "We've tried nothing and we're all out of ideas!" Link . The real problem here is that the Fed's mandate is to control unemployment and inflation by manipulating the federal funds rate and doing asset purchases and sales through the treasury. But, to solve the problem of persistently low growth, we need comprehensive regulatory reform to change the incentive structures that encourage businesses to move elsewhere and not reinvest their earnings at home. This means that the required reform literally is not within the Fed's powers. All the Fed can do is reactively adjust the interest rate and buy and sell assets, essentially manipulating the money supply, to try an get businesses to invest in labor and capital. There's nothing the Fed can do about the fact that international businesses are taking the cheap money, looking at the regulatory landscape, and are using that money to buy back their stocks, buy out competitors and move operations overseas to cheaper locales. The only way to fix this incentive problem is for the legislatures of the first world to undertake massive reform. Instead, what we have is infighting and regulatory sclerosis.

So where does that leave us? I predict that the results of the Jackson Hole meeting of central bankers will be a lot of hand wringing and a lot of doubling down on the same failed strategies. Until the governments of the world put on their big boy and girl pants and sit down and actually do some legislative reform, the first world is going to continue to follow in Japan's footsteps of ever increasing national debts and persistently slow or negative growth. So, to quote another internet meme, to the governments of the first world: "Your policies are bad and you should feel bad!" Link .

What's Going On in American Politics

Hello once again dear readers. As you may have noticed, I've been avoiding talking about the current election in the USA. This has left me with little to blog about recently, as the news here is still pretty much all election all the time. My not writing about the campaign is mostly because of my complete disdain for the process and my antipathy towards the candidates. The primary process is a joke, the rules are skewed to favor establishment candidates, and it has become so expensive to run that only shills for their party's well heeled interests can afford to run. Well, them or bombastic billionaires who don't care about wasting a few hundred million here or there. So I've avoided the subject like the poison it is.

During this time I have noticed that the powers that be in this election cycle constantly wonder why it is someone like an avowed socialist, or a bombastic billionaire, can be viewed by so many as viable candidates. To me it's never been that difficult to figure out, it's because both parties have betrayed their voters. What do I mean by this? That the left leaning democratic voters have seen election after election where their candidates have pledged to tame corporate interests and help the middle and working classes, and then failed completely to do so. Then, instead of owning up to their complete failure and acknowledging that most of their biggest donors are the corporate interests that they had pledged to tame, they blame the other party despite having controlled the presidency for 7+ years and majorities in the legislature on and off during this time. And don't think I'm letting the republicans off the hook either. They get elected by pledging to uphold "traditional" values, taming big government, and allowing the free market to prosper and create jobs for the middle and working classes, and have also completely failed in accomplishing any of it. They, however, at least are honest about being shills for their corporate overlords, not that this is all that much better than lying about it like their opponents do. Both parties are like children standing over the broken lamp of America and pointing at the other saying "He did it!" It's disgraceful. Meanwhile, wages have shrunk or stagnated, the labor participation rate has bounced around historic lows, and millions have fallen into virtual poverty, even if they aren't in poverty statistically. It baffles me how these fools can't see this and don't recognize that their positions of power have never, in their lifetimes, been on shakier ground. If they can't see socialist candidates and populist blowhards as canaries in the coal mines, then they deserve to be tarred and feathered. And if they continue to be so oblivious, they risk the proverbial tar and feathering becoming actual violent social unrest. This country was founded on revolution, and they would be fools to think another one isn't possible. But then, we already established their foolishness.

To go along with this sentiment, I read a poignant piece in the Wall Street Journal by Peggy Noonan. The premise of the article is having a "2016 Moment", or to realize this election will be historic, and not necessarily in a good way. She reports one of her long time friends, in stumping for a candidate in New Hampshire observed that:
"I was struck as I walked along a neighborhood using the app that described the voters in each house. So many multi-generational families of odd collections of ages in houses with missing roof shingles or shutters askew or paint peeling. Cars needing repair... It was easy to see a collective loss of hope in a once-thriving town... years of neglect and sadness. Something is brewing."
http://www.wsj.com/articles/that-moment-when-2016-hits-you-1461281849
This, I believe, hits it on the head; this is exactly what's going on in this country. Years of political neglect and kowtowing to special interests and the elite of both political persuasions has created a hollow shell of the America that was. An America which flees to the welcoming and reassuring arms of socialism, or into the bombastic fury of populism. Years of pursuing trade deals that export jobs and import profits for the elites, years of increasing taxation and decreasing return on those taxes, years of abject neglect, have destroyed the credibility of both parties. And if they don't make an about face soon, they may very well get crushed by the electorate they condescendingly pander to during elections, then ignore while in power.

If the politicians don't watch out, they may find the smell of freshly boiled tar visiting their neighborhoods. It may be time to invest in feather pillow manufacturers.

The Myth About Less-Skilled Millennials

I saw an article today that really pissed me off. It commits two sins I see constantly in modern journalism, namely it panders to its audience (in this case, baby boomers) without referencing any facts directly, and it ignores easily Googled facts that directly disprove its point. It's not that it addresses the facts and argues that they aren't important, I mean it just flat out ignores them. Instead, it references someone else's study without using any of the facts or figures the study used to make its conclusions. Moreover, it was printed in the Economics section of the Wall Street Journal. I expect a certain lack of facts or research in less respected news organizations, but the Wall Street Journal and The New York Times are supposed to be better than that. This article lets down the paper badly.

Well, enough preface, here's the link: http://blogs.wsj.com/economics/2016/02/29/how-a-less-skilled-american-workforce-may-be-holding-back-growth/ . You can see by its very title what its editorial viewpoint is, that the workforce is getting less skilled and that's what's wrong with the economy. Here's what really bothered me, it states that: "Well-educated baby boomers are retiring, and many laid-off older Americans who want to work have struggled to find jobs following the recession, bringing the overall experience level of the workforce down. College enrollment is on the decline after peaking in 2011, as the economic expansion creates job opportunities for less-skilled workers." The implication here is clear, workers not in the baby boom generation are less skilled. If it were just a question of experience, this wouldn't be an interesting statement at all. Obviously retirees are more experienced than those of working age, they're older. No matter what time in history we look at, this should be a true statement. The older are always more experienced by sheer dint of living longer and having had more experiences. This is so blisteringly obvious a statement that I refuse to believe that's the point of the article. The actual editorial perspective of the article is made clearer by the college enrollment statement. By saying baby boomers are well-educated and college enrollment is in decline, it’s using two, at least arguably, true statements to imply something that isn't true. Namely, that younger generations are poorly educated. Here's a Wikipedia graph on educational attainment over time: https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States#/media/File:Educational_Attainment_in_the_United_States_2009.png . The percentage of people 25 and older with a college degree has increased fairly steadily for the last 70 years. The article concludes by saying: "...there (i)s one obvious policy solution: more skills and more education." Well, we know that educational attainment has been increasing, so either we have a skills mismatch that the current educational system isn't meeting (so more education won’t cure the problem), or there are simply not enough jobs for skilled college educated workers. But implying that younger workers are poorly educated and unskilled is just pandering to the prejudices of older generations and not supported by basic facts.

And now we get to the crux of our economic doldrums. Even if we choose to ignore a global economic slowdown, wars across the middle east that have ravaged regional economies and trade partners, or the huge asset bubbles created by central banks desperately expanding the monetary supply in an attempt to cover for bad government policies that harm economic growth; the problem isn't that the fundamental makeup of the workforce is changing, it’s that the so called "recovery" is only creating low skilled, low paying, temporary jobs. The article even admits that in the above quote. College enrollment doesn't change where the demand for labor comes from, except possibly in higher education. In all likelihood, if we see continued declines in college education, it will be because employers have stopped valuing college degrees. Or, at least, that employers don't value them enough to pay a high enough wage to make the investment in a four year degree worth it. So let's stop bemoaning the bursting of the education bubble and let’s stop blaming a retiring baby boomer generation for a loss in workforce participation and productivity. Let's instead put blame where it is due. Namely, lets blame bad government policies that have created perverse incentives for companies to move as many jobs as humanly possible out of the first world. Policies that mean the only jobs created are low level service jobs that can't easily be outsourced overseas.

So what's the solution? First, we need to re-examine the benefits of free trade treaties with second and third world countries. If a country has a large net loss of jobs as a result of a trade deal, and can only point to cheaper goods and profits shared between corporate insiders and global investors, then the deal is a failure. A population of unemployed and underemployed workers can't afford to spend big on consumer goods, they rely much more heavily on welfare programs, and their lost taxable wages takes away the tax revenues governments need to pay welfare benefits. Cheap consumer goods mean nothing when a family is struggling to pay the bills and feed itself. Secondly, we need to rewrite the tax code so that big multinationals are paying at least as much in taxes on local revenue as the local start-ups that try to compete with them. The small business used to be the biggest employer of labor in the USA. But with a tax code that hamstrings them, small businesses have been failing and employing less people. Lastly, we need to intervene and cut the red tape that prevents small businesses from being created. This needs to be done at a local level, and solutions to these problems will necessarily be unique to each region.

And on a final note, I expect better of the Wall Street Journal. Don't just quote someone else's study to libel younger workers. Do some investigative reporting. Test the numbers in the study against other data sets to see if their conclusions make any sense. Moreover, when the world is at war, foreign economies are crumbling, and the Euro zone falling apart, blaming a dip in college enrollment and the retirement of baby boomers for our economic stagnation is just asinine. It's a symptom of much greater problems in the world, and ignoring those problems just makes it easier for lazy governments to do nothing about them. Lastly, stop blaming millennials for problems created by the policy decisions of the "greatest" generation and "baby boomers". No one should get a free pass for their poor leadership and economic stewardship.