This makes sense from what I see driving around Cleveland, Ohio USA. There are two America’s forming one the upper and upper middle classes and two all the rest with the elimination of the old middle class. The old middle middle class was forces out of their jobs in ’08/’09 as they were mostly over 55/50 and were able to survive selling off things and going on disability. This created the drop in the labor participation rate that we have seen from 66.2% in late ’07 to 62.8% at present. Those people not working but should be by age and ability went from 77.5 million in ’07 to 92.1 million today. These people are finding it harder and harder to survive and therefore falling behind on their payments.
Tag Archives: Social welfare
John Hussman: “Make No Mistake – This Is An Equity Bubble, And A Highly Advanced One”
Good work here pay attention!
How Progressivism got Started
In the Battle Between Woodrow and Wilson, Wilson Lost. So Did the World.
Judge Andrew Napolitano has written a book, Theodore and Woodrow. It is on the first decades of the 20th century, when the Progressive movement captured American politics. Except for the 1920’s — Harding and Coolidge — Progressivism has never surrendered political control in the United States.
I spoke with him on July 22, at Mises University, the annual week-long training program for undergraduates, which is sponsored by the Ludwig von Mises Institute. He was presenting a week-long series of lectures on the Constitution and the free market. The students get very good training on how the United States Constitution has been reinterpreted over the years, especially during the Progressive era.
I gave him some background that almost nobody knows. The essence of the battle for constitutional interpretation in the 20th century is found in the names “Woodrow” and “Wilson.”
THOMAS WOODROW WILSON
Woodrow Wilson’s full name was Thomas Woodrow Wilson, but he never went by Thomas. He always went by Woodrow. Woodrow is a strange name for a little boy to have. It is certainly a strange first name. As a middle name, it was okay, because it was his mother’s maiden name. So is my middle name. But I do not call myself by this middle name.
Woodrow Wilson’s father was Joseph Ruggles Wilson. He was the senior permanent bureaucrat in the southern Presbyterian Church in the late 19th century. He maintained the position of Stated Clerk for a third of a century. He was part of what was known as Old School Presbyterianism. This was the most conservative theological faction in 19th-century America — the true hard-liners. They were committed to a long document, the Westminster Confession of Faith (1648), plus two other documents, the Shorter Catechism in the Larger Catechism. These are the most detailed creedal documents in American history.
The position of the Old School was this: in order to become an elder in the Presbyterian Church, you had to swear your allegiance to these three long, highly detailed documents. A candidate for eldership was allowed certain reservations or exceptions, but these had to be approved by the presbytery, the regional bureaucratic structure. This applied to teaching elders (ministers/preachers) and ruling elders (laymen who had votes in the local congregation and the presbytery). In terms of Constitutional language, these were “original intent” interpreters of the foundational documents, i.e., the strict constructionists.
In contrast to the Old School was the New School. New School Presbyterians were much looser with regard to the rigor by which they enforced ministerial allegiance to the documents. The New School became dominant in the North after the Civil War, but not in the Southern Presbyterian Church. There, the Old School was dominant from the denomination’s creation in 1861, when the Civil War began, until the early 20th century.
There was a third group. These were the liberals. The liberals hid under the loose-construction confessional umbrella of New School Presbyterianism, but they in fact had almost no use whatsoever for any of the creedal documents. In order to get ordained, and then get lifetime salaries as ministers, they crossed their fingers. That is why I titled my book, Crossed Fingers. The subtitle is straightforward, How the Liberals Captured the Presbyterian Church. I specifically was referring to the Northern Presbyterian Church, but the same tactics were used by liberals in the middle the 20th century to capture the Southern Presbyterian Church. The two denominations reunited in 1983. The resulting denomination is liberal.
Woodrow Wilson’s mother had a brother, James Woodrow. James Woodrow was by far the most prominent liberal in the Southern Presbyterian Church in the late 19th century. He was a believer in theistic evolution. He openly stated his views, which was the cause of battles against him. His nephew Woodrow agreed with him. He was repeatedly brought to trial and officially sanctioned at the church’s national level, but the church never succeeded in removing him. He taught alongside his brother at Columbia Theological Seminary, the main seminary of the denomination. It trained ministers.
Woodrow was a Ph.D. in science (Heidelberg University). In 1884, he began to teach that the Bible’s account of man’s creation was not inconsistent with Darwin’s view. The furor grew. In 1886-87, the seminary shut down for a year because of the controversy. Yet it never fired him. He finally retired in 1905. The seminary then officially rescinded its previous criticisms. He was totally victorious. (For a detailed account of this controversy, click here.) He became the president of South Carolina College in 1891. Finally, in 1901, the denomination capitulated completely. He was elected as the moderator of the Synod of Georgia.
When Wilson became president of Princeton University in 1902, replacing an Old School minister, Francis Patton, he oversaw a complete transformation of the university. It began to teach straight Darwinism in its science courses — not a trace of theistic evolution.
James Woodrow died in 1907.
CONSTITUTIONAL GOVERNMENT
In Wilson’s book, Constitutional Government (1908), he came out in favor of implementing a Darwinian view of evolution to civil government. In 1906, he wanted to run for President in 1908 as the Democratic Party’s nominee. He had an ideological problem. He had been a Hamiltonian throughout his classroom career: a believer in a strong central government. The Hamiltonian vision was associated with the Republican Party generally, and after 1909, with Theodore Roosevelt’s Progressives specifically.
This was not the tradition of the Democratic Party in 1906. The Jeffersonian-Jacksonian tradition was laissez-faire. Bryan’s radical Populism had abandoned this tradition in 1896, but Populism was totally hostile to any elitist oligarchy–the essence of Hamiltonianism and, in Bryan’s eyes, the Republican Party.
The Democratic Party had nominated conservative lawyer Alton B. Parker in 1904, a defender of the gold standard, who lost so badly to Roosevelt that some of the Party’s leaders were ready to abandon the old Andrew Jackson-Grover Cleveland-Whig liberalism tradition. Bryan despised this tradition; he called it “Clevelandism.” Bryan was correct when he wrote in a letter, immediately after Parker’s defeat, “The defeat was so overwhelming that we are not likely to hear much more–for some years at least–of the reorganizers. The Democratic Party will now have a chance to become a real reform party.” Regionally, the Democratic Party was moving toward Progressivism throughout the first decade of the twentieth century, even in the South, but the national party did not clearly position itself as Progressive until after Taft’s defeat of Bryan in 1908.
Constitutional Government praised the presidency as the central political office: head of the party. This was a self-conscious break from the Constitution’s view of the office. The Constitution does not mention political parties, and the Framers had hated political factions in 1787. Wilson, having switched to Progressivism, had to undermine this older political faith. He turned to Darwin as the solution.
The framers had been Whigs because they had been Newtonians, he correctly argued. This Newtonian Whig worldview is incorrect, he insisted, and so is the Constitutional order that assumes it. “The government of the United States was constructed upon the Whig theory of political dynamics, which was a sort of unconscious copy of the Newtonian theory of the universe. In our own day, whenever we discuss the structure or development of anything, whether in nature or in society, we consciously or unconsciously follow Mr. Darwin; but before Mr. Darwin, they followed Newton. Some single law, like the law of gravitation, swung each system of thought and gave it its principle of unity” (pp. 54-55). The checks and balances built into the Federal government by the Constitution are now a hindrance to effective political action, he said. This language of balances reflects mechanism. We need to overcome this mechanical way of thinking, Wilson wrote.
The trouble with the theory is that government is not a machine, but a living thing. It falls, not under the theory of the universe, but under the theory of organic life. It is accountable to Darwin, not to Newton. It is modified by its environment, necessitated by its tasks, shaped to its functions by the sheer pressure of life. No living thing can have its organs offset against each other as checks, and live. On the contrary, its life is dependent upon their quick cooperation, their ready response to the commands of instinct or intelligence, their amicable community of purpose. Government is not a body of blind forces; it is a body of men, with highly differentiated functions, no doubt, in our modern day of specialization, but with a common task and purpose. Their cooperation is indispensable, their warfare fatal. There can be no successful government without leadership or without the intimate, almost instinctive, coordination of the organs of life and action (pp. 56-57).
I pointed out to Napolitano that “Wilson the Progressive” was the product of “Woodrow, the evolutionist.” Uncle James completely overcame the influence of his father.
CONCLUSION
Woodrow Wilson was the spiritual son of James Woodrow. He adopted his uncle’s position, theistic evolution, and then went beyond it academically: Darwinian evolution–no God, no purpose, no miracles. He then adopted Progressivism, which was the statist version of social Darwinism. (I discuss the transition from free market Darwinism to statist Darwinism in Appendix A of my book, Sovereignty and Dominion.) By 1900, it had replaced the free market social Darwinism of Herbert Spencer in the thinking of American intellectuals.
In the theological battle between Woodrow and Wilson, Woodrow won.
Ideas have consequences. This includes theological ideas.
The Rot Within, Part II: Inflation Is Not “Growth”
As a degreed economist I 100% agree with this; and I will add that Milton Friedman a Noble laureate economist proved definitely that is was the Federal Reserve that created the Great Depression (not the market crass of ’29) and by extension it was the same ineptness of the FED that created the housing bubble and crash of ’08 not the banks. The FED is now in the process of creating a sovereign debt bubble that is close to bursting and it will be worse than ’08. Keynesian economics is nothing more than a Ponzi scheme!
The Rot Within, Part I: Our Ponzi Economy
I can tell you with 100% certainty that this is 100% correct, I’m a degreed economist and engineer. I have studied this problem in detail since the late ’90s and I would say its even more dire than implied here — but we’ll see what the next part shows!
Industrial Production Drops, Misses By Most Since January
This lack of “real” growth not the funneling of money into the market is the underlining problem we have have in out country. And that stems from so much of our production being exported to China, India and Indonesia. Most would blame business but that would not be completely fair as they had no choice as we the citizens demanded cheap goods at the same time we demanded high wages. It doesn’t seem to me that the two are compatible unless the government controls the input. Sadly they did not as the surplus money went into funding the Treasure but buying T-bills and buy doing so the politicians had more money to play with and give us free stuff. That works only as long as the exporters allow it to happen — right now they are telling us they no longer want to do this and are changing the international system of exchange. That is going to be very very bad for us.
Re-Post from Zero Hedge Submitted by Tyler Durden on 07/16/2014 09:24 -0400
For the 3rd month in a row, Industrial Production missed expectations as hopes and dreams of follow through in Q2 remain dashed on the shores of hard data. IP rose 0.2% (missing the 0.3% expectation) and May’s jump was downwardly revised to 0.5%. What is stunning is that Industrial Production has slowed its gains from the polar-vortex Q1 into a much more economically frigid Q2. Capacity Utilization also missed expectations. Perhaps most worrying is the manufacturing industry’s mere 0.1% gain in June – the slowest increase since January.
Industrial Production missed for 3rd month in a row…
As Manufacturing tumbled…
Charts: Bloomberg
* * *
Does this look like a Q2 recovery bounce that is strong and supportive of 3% GDP growth?
The Almighty Dollar Is In Peril As The Global ‘De-Dollarization’ Trend Accelerates
Watch this closely over the next few months — this is the Achilles Heel of world commerce
Impact of IMF SDRs for Commercial Trade
Watch this closely over the next few months — this is the Achilles Heel of world commerce
This is a bit technical but VERY TRUE and the bottom line is we are very close to another collapse much like in October 2008
The Implosion Is Near: Signs Of The Bubble’s Last Days
Re-Post from Stockman’s Corner by David Stockman • July 14, 2014
The charts on his site to not transfer so go there to get the entire story.
The central banks of the world are massively and insouciantly pursuing financial instability. That’s the inherent result of the 68 straight months of zero money market rates that have been forced into the global financial system by the Fed and its confederates at the BOJ, ECB and BOE. ZIRP fuels endless carry trades and the harvesting of every manner of profit spread between negligible “funding” costs and positive yields and returns on a wide spectrum of risk assets.
Moreover, this central bank sponsored regime of ZIRP and money market pegging contains a built-in accelerator. As carry trade speculators drive asset prices steadily higher and fixed income spreads steadily thinner—- fear and short interest is driven out of the casino, making buying on the dips ever more profitable and less risky. Indeed, the explicit promise by central banks that the money market rate will remain frozen for the duration and that ample warning of any change in rate policy will be “transparently” announced is the single worst policy imaginable from the point of view of financial stability. It means that the speculator’s worst nightmare—–suddenly going “upside down” due to a sharp spike in funding costs—-is eliminated by central bank writ.
Stated differently, ZIRP systematically dismantles the market’s natural stability mechanisms. One natural deterrent to excessive financial gambling, for example, is the cost of hedging a speculator’s portfolio of “risk assets” against a broad market plunge. In an honest market environment, hedging costs consume a high share of profits, thereby sharply limiting risk appetites and the amount of capital attracted to speculative trading.
By contrast, an extended regime of ZIRP, coupled with the central banks’ perceived “put” under risk assets, drives the cost of “downside insurance” to negligible levels because S&P 500 put writers are emboldened and subsidized to pick up nickels (i.e. options premium) in front of a benign central bank steamroller. This ultra-cheap downside insurance, in turn, attracts ever larger inflows of speculative capital to the casino.
This corrosive game has been underway ever since the Greenspan Fed panicked on Black Monday in October 1987 and flooded the stock market with liquidity. It is now such an endemic feature of Wall Street that it is falsely assumed to be the normal order of things. But, then, would anyone have been picking up nickels in front of the Volcker steamroller?
This dynamic is evident in the chart of the S&P 500 since the March 2009 bottom. The dips have gotten shallower and shallower as ZIRP and other pro-risk central bank policies have eroded the market’s natural defenses against excessive speculation. As of mid-2014, therefore, it can be fairly said that fear and short interest have been extinguished almost entirely. The Wall Street casino has thus become a one-way market that coils dangerously upward, divorced completely from the fundamentals of earnings and cash flow and real world economic conditions and prospects.
The inverse side of this coin is disappearance of volatility in the equity markets. As shown below, the current readings are at all-time lows, even below bottoms reached on the eve of the 2008 financial crisis. Needless to say, this dangerous condition does not appear by happenstance: its is the inexorable and systematic result of ZIRP and the associated tools of monetary central planning.
But all of this is ignored by the central banks because their Keynesian economic plumbing models contain a fatal flaw. These models purport to capture capitalism at work, but they contain no balance sheets and hardly any proxy for the financial markets which are at the heart of modern capitalist economies. As a result, central banks pursue ZIRP in order to inflate the plumbing system of the macro-economy with more “demand”—and hence more jobs, income, investment and GDP—-while ignoring the systematic destruction of financial stability that results from these very same policies.
As a consequence, Keynesian central bankers are bubble-blind. Whereas they monitor immense amounts of “in-coming” high-frequency macro-economic data that is trivial and “noisy” in the extreme, they ignore entirely “in-coming” financial market data that points to monumental troubles just ahead.
At the present time, for example, 40% of all syndicated loans are being taken down by sub-investment grade issuers. This is materially higher than the 2007 peak, and is accompanied by an even more virulent outbreak of “cov-lite” credit terms. Indeed, upwards of 60% of these junk loans have no protection against debt layering and cash stripping by equity holders—-notwithstanding their nominal “senior” status in the credit structure. The obvious implication, of course, is that the Fed “easy money” is being massively diverted into leveraged gambling and rent stripping by the LBO houses. Three times since 1988 this kind of financial deformation has led to a thundering bust in the junk credit market. Why would monetary central planners, who allegedly watch their so-called “dashboards” like a flock of hawks, think the outcome would be any different this time?
40pc of syndicated loans are to sub-investment grade borrowers
The monetary politburo remains unperturbed, of course, because they are not monitoring the composition and quality of credit. Their models simply stipulate that aggregate business loan growth will lead to more spending on capital assets and operational expansion including hiring. That assumption is manifestly wrong, however, because it is plainly evident that most of the massive expansion of business credit since the last peak has gone into financial engineering—-stock buybacks, LBO’s and cash M&A deals—-not expansion of productive business assets. Indeed, total non-financial business credit outstanding has risen from $11 trillion in December 2007 to $13.8 trillion at present, or by 25%, yet real business investment in plants and equipment is still $70 billion or 5% below its pre-crisis peak.
And that is “gross” spending for plant and equipment as recorded in the “I” term of the GDP accounts. The far more relevant measure with respect to economic health and future growth capacity is “net business investment” after accounting for depreciation and amortization allowances. That is, after accounting for the consumption of capital that occurred in the production of current period GDP. As shown below, that figure in real terms is 20% below the peak achieved two cycles back in the late 1990s.
In short, the combination of faltering investment in real plant and equipment juxtaposed to peak levels of leveraged loan finance should be a warning sign of growing financial instability. Instead, the central bankers bray that valuation multiples are not out of line and financial institution leverage is reasonably well-contained.
The “valuations are normal” line proffered by Yellen and her band of money printers, however, is simply an adaptation of the Wall Street hockey sticks based on projected earnings ex-items. That is to say, the kind of “earnings” estimates that omitted on average 23% of actual P&L charges over the course the 2007-2010 boom and bust cycle owing to non-recurring write-downs of goodwill, plants, leases and restructuring costs, among countless other real expenses—all of which ultimately consume corporate cash and capital. As I demonstrated in “The Great Deformation”, cumulative S&P 500 “earnings less items” over that four-year period amounted to $2.42 trillion compared to GAAP reported earnings—-that is, the kind that you don’t go to jail for reporting to the SEC—of only $1.87 trillion.
Consequently, the Fed fails to see the in-coming data on financial instability because it isn’t looking for it, and is simply tossing out Wall Street sell-side propaganda as a sop. The disappearance of volatility in the S&P 500 chart shown at the beginning, for example, is nearly an identical replica of the run-up to the 2007 stock market peak. Yet the appearance of a proven warning sign of a bubble top has been resolutely ignored.
The fact is, PE multiples are far above “normal” based on GAAP earnings in historical context. During the LTM period ending in Q1 2014, S&P 500 earnings amounted to $100 per share after adjustment for a recent change in pension accounting that is not reflected in the historical data. Accordingly, even the big cap “broad” market is trading at 19.6X reported earnings—a level achieved historically only at points when the stock market was on the verge an implosion.
Moreover, today’s $100 per share of earnings are highly artificial owing to massive share buybacks funded by cheap debt and by deep repression of interest carry costs. The S&P 500 companies carry upwards of $3 trillion in debt, but were interest rates to normalize— earnings per share would drop by upwards of $10. Likewise, profit margins are at an all-time high, indicating that the inevitable “mean-regression” will chop significant additional amounts out of currently reported profits.
In other words, at a point which is month #61 of the current business cycle, and thereby already beyond than the average cycle since 1950, why would any one in their right mind say a market is not bubbly when it’s trading at nearly 20X reported earnings. Indeed, in a world where interest rate and profit rate normalization must inevitably come, the capitalization rate for current earnings should be well below normal—-not extended into the nosebleed section of historical results.
And this applies to almost any other measure of valuation in risk asset markets. The Russell 2000, for example, still stands at the absurd height of 85X reported earnings. The cyclically adjusted S&P stands at 24X, or six turns higher than its half century average. The Tobin’s Q measure is also far more stretched than in 2007.
Likewise, emerging markets have piled on $2 trillion in foreign currency debt since 2008. This makes them far more significant in the global financial scheme than they were in 2008 or even at the time of the East Asia crisis of the late 1990s. And that is not even considering the massive house of cards in China, where credit market debt has soared from $1 trillion at the turn of the century to $25 trillion today.
At the end of the day, the Fed and its fellow traveling central banks have systematically dismantled the natural stability mechanisms of financial markets. Accordingly, financial markets have now become dangerous casinos in which speculative bubbles are guaranteed to build to dangerous extremes as the central bank driven financial inflation gathers force. That’s where we are now. Again.
ObamaCare: The Perfect New-Keynesian Policy Prescription? | Health Policy Blog | NCPA.org
This is the very heart of the “FALSE” belief of those follow Keynesian Economics, which in essence is that any savings is bad since it takes away from spending and therefore causes unemployment.
Paul Krugman is apparently so entranced by the magic that he believes that forcing firms to replace capital, even if it makes them poorer, “can stimulate spending and raise employment” and “the broken windows fallacy ceases to be a fallacy.” In this alternate universe, hurricanes Katrina and Sandy could do more for U.S. economic growth than the development of the petroleum industry, the refinement of the internal combustion engine, the development of the electric power industry, or the development and use of the semiconductor transistor.
Professor Cochrane writes that macroeconomists looking at new ways to explain the slow growth disaster are considering the uncertainty introduced by arbitrary policy changes, large distorting taxes, intrusive regulations, and the “unintended disincentives of social programs.”If these new approaches are correct, and one’s goal is to inflict maximum economic damage on Americans, ObamaCare is a smashing success. It affects the whole population, generates huge uncertainty…
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