As XER said, this is a great time to be alive.
One of the many funky things we can witness in the present is the evidence of badly-structured relationships between this and that. Now that the economy is no longer engaged in continuous, steady, predictable growth on a mass scale, all kinds of previously-hidden positive-feedback mechanisms are coming to light. The standard motor vehicular analogy might be like taking your foot off the gas in a real “lead sled” of Detroit pig iron, only to realize that it can’t idle smoothly and the brakes/steering don’t work right.
Take for example the issue of government revenues here in the soon-to-be former USA. Tax revenues are headed off a cliff due to decreased economic activity. Governments foolishly assume the present troubles are just a rough spot we’re passing through, insist they budgeted X dollars for this coming year’s needs plus payment on debts from before, and then they raise the tax rates to meet those projected revenue needs. For the businesses still paying taxes here, for the people still paying taxes, for property owners of all kinds paying taxes, etc, this could not come at a worse possible time: right as things are the most tight for them, the government is actually /raising/ tax rates.
Another such positive-feedback mechanism exists in the relationship between employers and employees here. Due to revenues going down, most businesses are quite-naturally attempted to keep shedding their least-useful employees while also reducing wages for the remaining employees while also piling more work duties onto the remaining employees. It goes without saying that with each person taken out of the workforce, there is that much less domestic purchasing power loose out there. Furthermore, employers who pare their workforces down to only their best people, cut wages while shuffling more work onto the remaining employees, keep cutting benefits, etc, risk the ire of those same people if the economy ever improves to the point where job mobility is not just a theoretical possibility as it is now.
Here in the former land o’ plenty, a similar positive-feedback relationship exists in intentional communities. When the economy is horrible in general, those communities are usually having a bad time themselves since their export trade goes way down. Not coincidentally, these same hard times produce a record flow of new people showing up to apply for membership to said communities, right when they’re least-able to take on new people. Likewise, when the general economy is doing very well, the communities have a harder time keeping their more entrepreneurial members who can do far better for themselves outside the community.
It seems that life in the western nations is going to be an annoying, unending series of ups and downs until we get a little more clueful about our priorities so that we can design for better societal and organizational stability.
September 4, 2010 at 5:57 pm
Is it just me, or are we in trouble here?
There’s a guy, let’s call him Joe. Joe had a job in a factory for $18/hour. Joe’s wife Mary, took in 5 kids for daycare @ $600/month each. Their gross income per year was roughly $73,000.
They have 2 kids and 2 dogs and 2 cars. The dogs they could afford.
In order to accommodate the daycare Joe & Mary bought a large house in the burbs with a yard for $500k. They still owe $400k on the first mortgage but when their bank manager told them their home had appreciated to $600k they took out a HELOC for $100k. They took a trip to Greece, (Joe’s mom’s parents were Greek) bought a boat and a couple of flat screens (one for the kids, one for the living room) add a couple of odds and ends like iphones and laptops and damn you know $100k just seems to melt away.
Unknown to Joe his company had been negotiating for over a year to move the factory to Thailand. Joe got 2 weeks severance pay. Unfortunately, Mary’s day care business fell to just two kids as the other’s parents suddenly found, due to lack of employment. that they had the time to look after their offspring.
Joe is collecting unemployment but that runs out next week. Mary is now looking after one kid and that may not last much longer. They checked with the bank to see if their HELOC could be increased but found that their house value had dropped to $300k and they owe $500k so uh… No!
Foreclosure looks unavoidable. Joe and Mary fight all the time. The kids are doing poorly at school and they wouldn’t eat except that they get food stamps every month. Still those last few days before the card is refilled can get hungry.
Where before Joe & Mary were what were called good tax–paying citizens they are now consuming considerable government resources. And as the number of J & Ms of the country increase, seemingly exponentially, governments are getting less and less and paying out more and more.
Joe is looking for work but he only knows what he did at the factory. The local McDonalds and Burger King hire only part–time kids. Joe goes down to 3rd Street most days where people hire day laborers but he only averages about $80 extra per week.
What’s the point of my story? Well it’s actually a reading comprehension test. Answer the following questions without looking at the above.
~How much discretionary income do J & M have now?
~Joe’s kids will go to university and have a better life than him. True or False.
~Give the odds for Joe to retrain for a higher paying job.
~Mary is happier now with less to do and Joe at home more often. T or F
~The factory owners will tire of Thai food and return to the UPL. T or F
This is all just a bad dream. T or F
September 4, 2010 at 6:32 pm
How much discretionary income? None.
Joe’s & Mary’s kids going to university & having a better life? False unless they’re /really/ special and can get full-tuition scholarships, and even then the world will be a rather different place. Even as of the present, plenty of bright folks with multiple degrees can’t find work of any kind.
The odds for Joe to retrain for a higher-paying job? Low – who’s covering the cost of the retraining?
Is Mary happier now? No, she’s stressed over money.
Chances of the factory owners tiring of Thai food and returning to the UPL? Trick question – the factory owners are still here in the UPL, or, if they’re merely stockholders, they didn’t move to be near the factory anyway.
Is this just a bad dream? I wish
September 5, 2010 at 2:02 pm
Joe and Mary are in deep kim chee. They should seriously consider filing for bankruptcy while that window is still open to them.
Answers:
None.
False. Colleges and universities right now are preying upon people’s hopes and false expectations about the future. It’s ugly to witness.
False. The kids and whatever love they have for each other are probably the only things holding their relationship together.
False. Thai food is great. They might like the opportunity for travel in indochina, as well. Girls are pretty and like americans.
September 5, 2010 at 2:09 pm
Ooops, forgot to answer the last question. I assume the Joe and Mary part are a fiction, but probably based upon some composite of real examples. It is indeed a nightmare, so yes, it qualifies as a bad dream.
September 5, 2010 at 10:38 pm
Yeah, Doom it’s a fiction but a true one. Truth is, it simply flowed out while I wrote it because I’ve absorbed so many stories like it and have seen the horrible stats such as 40 million on food stamps. And as a representation it’s not even the worst of what’s happening out there/here.
September 8, 2010 at 10:37 am
And as long as J&M insist that every house is an isolated island, and the “neighboring” houses part of an archipelago where nobody knows about canoes, things will only get worse. Perhaps a third of those other islands are having the same issues, some not so bad, some worse. As their plight becomes the new normal, the answer is the same as on one of the Revolutionary War banners:
JOIN OR DIE.
September 8, 2010 at 7:49 pm
Another feedback mechanism is when populations of 1st world countries become so disgruntled with their governments that they end up with a hung parliament after elections (See UK and Oz recently), thereby hamstringing the government that does form from passing any useful legislation.
September 8, 2010 at 7:57 pm
There’s a flip side to the “hamstringing the government that does form from passing any useful legislation” angle .. it also keeps it from passing useless legislation. I can only wish we’d had such a government in place when the wars were declared on Iraq and Afghanistan, when the so-called Patriot Acts were passed, when TARP was voted through, while the endless Housing Stimuli keep getting passed, etc.
September 9, 2010 at 12:10 am
Yeah Nudge, I keep wondering why it’s apparently in the best interests of Obama and his Dems to keep those so-called Patriot Acts on the books.
Like a wag said recently, “We don’t need new law legislation, we need the old laws to be enforced”.
September 9, 2010 at 6:59 am
Doom, agreed. Note how the Obama administration isn’t doing squat to repeal the Patriot Acts, claw back the bailouts-to-the-rich, reinstate the firewall between banking & investment as formulated in the Glass-Steagall Act of 1933, and more. This is exactly the same sort of pandering-to-the-oligarchy that we’ve had for decades now in the UPL, with predictable results.
Lol, just think, Hillary could compete nicely against BO now under the phrase “A candidate with a US birth certificate”.
September 19, 2010 at 8:36 am
Wonderful post. You describe the workings of the positive feedback loop perfectly.
The period of adjustment and “clearing” of trillions in public and private debt will take at least 20 years. But it will never be really cleared- that is, repaid-because recovery as we understand it will be impeded by the contraction in liquid fuel supplies.
If our present banking cartel would just take their losses and fade away, we could recover to a changed economy, one much smaller, simpler, and on a regime of reduced energy imputs, but this will not happen, or at least not soon, because every dime available now has been committed to making good on this bad debt, which of course is not really possible. Thus, we are wasting the capital that could be building the industries we will need, such as power plants and conventional rapid rail, to propping up the old, failed order and old, outdated industries, thanks to our political leaders’ commitment to serving their banker cronies at all costs.
Thus we will sink further and any capital that might be available for the investment we need will remain on the sidelines as we sink to the point where absolutely nothing works at all.
September 21, 2010 at 9:16 pm
Laura, sorry, your comment got snagged in one of the filters. Mahalo.
What you wrote is depressing, but accurate: “ .. but this will not happen, or at least not soon, because every dime available now has been committed to making good on this bad debt, which of course is not really possible. Thus, we are wasting the capital that could be building the industries we will need, such as power plants and conventional rapid rail, to propping up the old, failed order and old, outdated industries .. ”
Considering the scale and the inevitability of some of the more serious problems coming our way (the end of PO’s bumpy plateau, the irreversible effects of climate change, a lot of infrastructure going kaput when we can least afford to repair/replace it, to name but a few) the abovementioned actions of our political leaders seem more like an abdication of responsibility. Our leaders have made it superabundantly clear, over many decades and with the active participation of both major political parties, that they will support the property rights (and material expectations) of the rich almost to the exclusion of everyone and everything else.
This too is depressing, but I can’t warn people enough to start getting ready on their own and in groups, localities, and in whatever community they can find or make around them. Our present political structures are still living in La-La Land, where the “recovery” to 2005-era business is just around the corner once we get through this “rough spot”. As such, they will be useless and ineffectual in the face of systematic changes they refuse to acknowledge.
September 21, 2010 at 10:18 pm
Hey, look on the bright side, Nudge and Laura, they canned Larry Summers today!
Another “brilliant economist” bites the dust.
http://www.cnn.com/2010/POLITICS/09/21/obama.summers/index.html?hpt=T2
September 22, 2010 at 12:00 am
Yes, but apparently they didn’t shoot him, ah well, where is Madame Defarge when you really need her?
Laura, excellent post. Pretty much sums it up. I don’t think it’s overstating it to say that it’s the greatest political tragedy in history that our leaders have made no attempt to mitigate or even inform. Otoh, it is always up us.
September 22, 2010 at 6:42 am
Patz, the eerily clueless Larry Summers follows in the footsteps of Christina Romer. Ms Romer at least had the honesty to admit that the administration’s economic team had no clue and still doesn’t have a clue.
Pardon me for carping on organizational hegemony and the pervasiveness of the Peter Principle (lol things I deal with daily) but didn’t these people ever make it through Basic Thinking 101? If even after exposure to cartloads of evidence on thing X, you still don’t even remotely understand X, this most likely means that you’re the wrong person for dealing with X .. with a less-likely meaning being that you’re using the wrong approach or the wrong tools for the task of understanding X. Similar to this would be the danger of lying to oneself, as the government’s economic team does when it uses the official, highly-bogus, completely-manipulated CPI and unemployment numbers.
Similar to this would be the honest recognition that one’s policies and attempted moves are completely backfiring in all ways. If policy Y is designed to fix problem X, but instead every N units of application of Y make X worse by some factor dependent on N, it means you’re doing the wrong thing. The classic example of this is the motorist who gets stuck in the mud and keeps gunning the engine to get out of the rut, and who only succeeds in making the rut deeper.
If this is the best that government and academia and the finance industry can offer, then we’re definitely headed into the family of scenarios categorized by running BAU harder and harder until it simply stops working. By “stops working” I assume this will come to mean steeply rising taxation levels (along with falling energy availability, rising general costs, worsening prospects for normal functioning of markets, etc) until economic paralysis is induced.
September 22, 2010 at 12:03 pm
Nudge, do the words “dishonest, disingenuous, liar, fraudster, and crook” have meaning for you? Summers was one of the principal architects of the Wall Street financial fraud. He’s been doing it for a long time, since at least the Clinton administration. He deserves to be in prison, or worse.
His appointment was a critical one exposing the Obama admin.’s plan to continue the fraud. Bowing out now just exposes it moron, like Bushco trying to mitigate it’s failed Iraq War PR problems with Rumsfeld’s removal. It won’t work or solve anything, unless a “true reformer” takes Summer’s place, and I guarantee they won’t appoint one. IOW, Obama is desperate, and knows he will probably lose, big time. Please shed some crocodile tears for him.
September 22, 2010 at 7:11 pm
Doom, right on.
“Summers was the Treasury Secretary when Glass Steagall was repealed. Instead of speaking out against the irresponsible Gramm–Leach–Bliley Act (Financial Services Modernization Act of 1999) that allowed the Financialization of America to progress, he actively supported it. Instead of explaining to the public how Glass Steagall had prevented every Wall Street crisis since the Great Depression from spilling over onto Main Street, he rolled over for Citibank.
Understand that the repeal of Glass Steagall was not a cause of the crisis. But, it allowed the net damage to be far greater and extend far wider than it would have otherwise been. From a libertarian perspective, it was emblematic of the corporate takeover of the legislative process. For a hefty fee (aka campaign donation) you could pretty much write the regulations that covered your own industry. How could that ever go wrong?
Summers oversaw the passage of the even more ruinous Commodities Futures Modernization Act of 2000. The CFMA exempted all financial derivatives from any and all regulatory oversight. The CFMA not made the AIG collapse possible, it made it highly likely. It helped to set up both the Lehman and Bear Stearns’ collapses. The CFMA allowed AIG FP to write over $3 trillion in derivatives, reserving precisely zero dollars in case these insurance policy-like obligations had to be paid out.”
from Summers: good riddance as quoted in user comments at TAE
September 23, 2010 at 12:14 am
Larry Summers; how about exile to Zimbabwe in charge of toxic waste? Nah, what did they ever do to us. Pathetic excuse for a human he is. Ditto what you said Doom.
July 21, 2011 at 4:26 pm
Lots of talking heads from NASA on TV today. Lots of questions, but none of them were asked “what do you think of Nudge’s post on inverse relationships?”
July 23, 2011 at 11:34 am
I’m shocked!
July 23, 2011 at 12:23 pm
What more proof do you need?
July 23, 2011 at 12:40 pm
Did the NASA people studiously avoid the use of the terms “simplification” or “decomplexity”?
Eventually the UPL will discover the beautiful simplicity of exiting the expensive, unending wars in the ME, as have the other nations that have tried to remake Af’stan in their own image. Eventually most of our communities will rediscover the beautiful simplicity of recycling human/animal wastes as nitrate-rich fertilizer for use on local farms. Much breakdown of existing stuff will be required before so many cherished, false notions are surrendered. Interesting time, indeed.
July 24, 2011 at 6:20 pm
Uncle Yarra
The superpower hasn’t got such a super hold on the future of space anymore. A symbol for the end of empire?
Comments?
Thursday 21 July 2011 02:38:01 pm
Dmitry Orlov
I think there is great symbolism and irony in the fact that the Americans now have to fly Soyuz (“Union”, as in “Soviet” ) to get to the space station. Once upon a time Soyuz and Apollo mated in orbit. Now Soyuz is mating with the space station, and Apollo is hanging in the Air and Space museum in Washington, being gawked at by schoolchildren. It seems unfair, somehow. Whose cold war victory is this, anyway?
Friday 22 July 2011 12:10:20 pm