vineri, 31 mai 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

You Are About to Become Obsolete; Perhaps You Already Are (But You Don't Realize It Yet)

Posted: 31 May 2013 12:21 PM PDT

A friend of mine sent a thought provoking link to a book-in-progress called Robots Will Steal Your Job But That's OK.

The author, Federico Pistono, periodically writes a new chapter and I just signed up for updates.

The introduction caught my eye.
Introduction

You are about to become obsolete. You think you are special, unique, and that whatever it is that you are doing is impossible to replace. You are wrong. As we speak, millions of algorithms created by computer scientists are frantically running on servers all over the world, with one sole purpose: do whatever humans can do, but better. These algorithms are intelligent computer programs, permeating the substrate of our society. They make financial decisions, they predict the weather, they predict which countries will wage war next. Soon, there will be little left for us to do: machines will take over.

Does that sound like some futuristic fantasy? Perhaps. This argument is proposed by a growing yet still fringe community of thinkers, scientists, and academics, who see the advancement of technology as a disruptive force, which will soon transform our entire socioeconomic system forever. According to them, the displacement of labour by machines and computer intelligence will increase dramatically over the next few decades. Such changes will be so drastic and quick that the market will not be able to abide in creating new opportunities for workers who have lost their jobs, making unemployment not just part of a cycle, but structural in nature and chronically irreversible. It will be the end of work as we know it.

Most economists discard such arguments. Many of them don't even address the issue in the first place. And those who do address this issue claim that the market always finds a way. As machines replace old jobs, new jobs are created. Thanks to the ingenuity of the human mind and the need for growth, markets always find a way, especially in the ever-connected and globalised mass market we live in today.

In this book I will try to avoid picking either side based on belief, gut feeling, or hunch. Rather, I will attempt to engage in informed logical reasoning, based on the evidence we have so far.

The book is divided into three parts. First, we will explore the topic of technological unemployment and its impact on work and society – I chose to focus on the US economy, but the same argument applies to most the industrialised world. In the second part we will look into the nature of work itself and the relationship between work and happiness. The last part is a bold attempt to provide some practical suggestions on how to deal with the issues presented in the first two parts. Doing a thorough examination of each section would require a monumental effort, possibly resulting in thousands of pages, far exceeding the purpose of this book. My intention is not to write a complete academic report, but rather to initiate a discussion about what I think will soon be one of the biggest challenges that we have to face as a society and as individuals. Too often we treat various issues as separate subjects, not realising the interconnected nature of our reality. This mistake has made us weak and vulnerable. Over the last 70 years, we have set the stage of our own demise. We have become increasingly discontent, the quality of our relationships have diminished, and we have lost track of what really matters. Today, as the comedian Louis CK has noted: "Everything is amazing, and nobody is happy!" It is time to take a step back and think about where we are going.

Let us begin the journey. ...
Part I is on Automation and Unemployment, and consists of five chapters. Parts II and III are not yet posted. Inquiring minds may wish to follow the journey.

What If?

In the following short 4-minute video Federico Pistono asks "What if the jobs cannot come back? What if it is intrinsically impossible for the jobs to come back? What if unemployment is structural?"



Here is a 17 minute video that is also worth a look. Pistono argues "no one is safe" while asking "what happens if Walmart fully automates?"



Here is my favorite snip from the video: "As much as 80% of the people hate their job. That's four out of five spending most of their useful life doing something they don't particularly enjoy. We are in kind of a work paradox because we work long and hard hours, on jobs we hate, to buy things we don't need, to impress people we don't like. Genius!"  

Structurally High Unemployment

For several years I have been writing about the concept of "Structurally High Unemployment" but Pistono goes far beyond that. He explores the idea this is not just another creative destruction phase that will be followed by another job boom, but rather this is the end, computer intelligence is why, and that's a great thing!

Pistono's socialistic vision of the future is that robots will do everything, there are infinite resources, no one has to work, and we all live happily ever after.

To say I disagree about that Pollyanna endgame is putting things mildly. And since I believe there is no work-free nirvana, here's the key question: what if Pistono is half-right, that no job is safe, that no jobs are coming, but robots do not provide the "But that's OK" nirvana Pistono imagines.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Bad Weather in France to Blame For ...

Posted: 31 May 2013 10:15 AM PDT

Courtesy of my friend Bran who spotted these weather related anomalies in France. Via Google translate, it appears that French economists blame the weather for ...

  • Delayed maturation of fruits and vegetables
  • Disrupted cows
  • Public work productivity declines
  • Increased electrical consumption
  • Construction degradation
  • 5 to 10% drop in tourist reservations
  • Decline in bridge traffic in May between 10% and 30%
  • 30% drop in custom restaurants due to closed outside terraces

Sacrebleu!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Intellectual Dishonesty and Insanity on Steroids

Posted: 31 May 2013 02:36 AM PDT

I just finished reading The Smith/Klein/Kalecki Theory of Austerity by Paul Krugman and I believe it is the most disingenuous piece he has ever written.

Krugman comes out blazing with the statement "Noah Smith recently offered an interesting take on the real reasons austerity garners so much support from elites, no matter how badly it fails in practice."

He then cites various sources who suggest "business interests hate Keynesian economics because they fear that it might work".

While halfheartedly dissing a similar thesis in Naomi Klein's Shock Doctrine, Krugman goes on to say the "thesis really helps explain a lot about what's going on in Europe in particular."

Paul, Please Be Serious

The first problem I have with the article is Krugman knows damn well that no Austrian-minded economist on the planet supports what is commonly, and mistakenly (on purpose) referred to as "austerity".

Please take a look at what Austrian economists want vs. what the nannycrats in Brussels delivered.

What Austrians Want

  • Lower taxes
  • Less regulation
  • End of Fractional Reserve Lending
  • Sound money
  • Smaller government
  • Work rule reform
  • Pension reform
  • Free trade

What Brussels Delivered

  • Higher income taxes
  • Higher VAT
  • Proposed financial transaction taxes
  • More regulation
  • No free trade
  • Little if any work rule reform
  • Little if any pension reform
  • Reluctant (at best) cuts in government jobs
  • Reluctant (at best) cuts in government spending
  • No sound money
  • No end of fractional reserve lending
  • Bailouts at taxpayer expense

Insanity on Steroids

Krugman and others parade that mess as "austerity". It's not austerity. Rather, it's insanity on steroids, and every Austrian economist on the planet knew it would not work.

Yet, month in and month out we have to listen to the likes of Krugman saying or implying "I Told You So".

Well, la de frickin' da. I told you so too. And so did thousands of others, Keynesians and Austrians alike.

Krugman would have you believe it's austerity as implemented vs. Keynesianism. Well, it's not, and he knows it, because any thinking mind knows tax hikes in the middle of a recession is insanity.

Idiots Do Idiotic Things

I do not know for sure why the idiots in Brussels forced those measures on Greece, Cyprus, Spain, Portugal, or Ireland, but the most likely explanation is simply "idiots do idiotic things".

To jack this into a belief that politicians did these things out of fear Keynesian policies might work is more than a stretch of the imagination, it's preposterous.

About Those Keynesian Solutions

No, Paul, we do not fear Keynesianism or Monetarism will work, because theory and practice alike say neither will work. If they did work, Japan would not be a basket case after 20 years of trying.

I have asked this simple question of Krugman for what seems like a decade "When does it stop Paul? When?"

Krugman has never answered, but one can presume "never". Japan is supposed to keep on spending money it does not have on wasteful projects "until it works". The US supposedly needs to do the same.

The average 7th grader knows that paying people to dig holes and then others to fill them back up again is economic idiocy, but the average Keynesian doesn't.

With Japan leading the way, we are about to witness the results of such foolishness, but the comfort to the US is Japan will blow up first. Will that change Krugman's mind?

Hardly. And I have an ironic suggestion: Krugman does not want to try Austrian solutions out of fear they might work.

Given the world has tried his methods and they have failed, what else should one believe?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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