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Musings Report #25 6-21-14 We Need a New Social & Economic Model
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For those who are new to the Musings reports: they are basically a glimpse into my notebook,the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
We Need a New Social & Economic Model
The unsustainability of the Status Quo model--of organizing society around a top-down central state and the economy around endless growth of debt-based consumption and a market dominated by the state, financiers and large corporations--is obvious.
These two recent articles do an excellent job of describing the limits to the current model:
It's simple. If we can't change our economic system, our number's up.
The open source revolution is coming and it will conquer the 1% (via Cheryl A. & Stephen N.)
Relying on permanent expansion of debt and consumption to distribute the surplus of an economy is not sustainable. Both the real world of resources such as fresh water and the financial world of debt have intrinsic limits.
Relying on a centralized state that is intrinsically vulnerable to capture by private wealth is not a recipe for distributing the surplus of an economy in a sustainable fashion.
Relying on traditional state/private-sector jobs to distribute the surplus of an economy is also not sustainable as human labor is increasingly replaced by networked software and robots.
The "solutions" offered by the conventional Left and Right ignore or marginalize these structural forces. The Left sees a future in which corporations / financiers that own the robots will be taxed at sufficiently high rates to pay most of the work force to do nothing but seek amusement via consumption and digital distraction--a purposeless, meaningless existence that I term permanent adolescence. A structural shortfall in tax revenues to pay for these ever-rising social welfare benefits will be paid by state borrowing, which is magically assumed to have no consequences: trillions can be borrowed (i.e. stolen) from future generations essentially forever.
The Right assumes jobs will be created in greater numbers once the state gets out of the way, even as the reality of higher labor costs and lower digital/machine costs make the replacement of human labor ever more financially compelling. The free-marketers assume (with no recent evidence to substantiate their faith) that technology always creates more jobs than it destroys, but this faith ignores the still-infant deflationary forces of the Web and digital technologies. The Third Industrial Revolution is about software replacing humans in service jobs--the last redoubt of mass employment.
I think it is abundantly clear we need a new model for distributing political power and material surplus. The outlines of a new model are now visible: in what I call the Community Economy, in a decentralized state tasked with protecting the commons, and in an open-source economy of sharing surplus not just on skilled high-value work (increasingly scarce) and corrupt cronyism but on service to a community.
I have done my best since 2009 to outline the positive responses that individuals, households and small enterprises can pursue in a Status Quo that is failing. I also sketched out a new model of the state in "Resistance, Revolution, Liberation."
But I now see the need to sketch out an integrated model of organizing society and the economy that recognizes and works with the realities of the Emerging Economy and moves beyond the ruinous centralized, top-down monetary and state policies that are doomed to implode for the simple reason they no longer work.
We have collectively dodged this reality for the past 6 years, but that avoidance cannot last. We must face up to the need for an entirely new model of organizing society and the economy that enables a broad-based distribution of political power, sustainable material well-being and purposeful/meaningful work.
Though most believe this process can be limited to some minor policy tweaks, I think we're long past the point that fundamentally broken centralized systems can be repaired with the financial and political equivalent of duct tape: debt (stealing from future generations) and short-term politically expedient fixes that buy off powerful constituencies.
Please stay tuned for more on these new models of money/finance, political power and economic vitality/prosperity.
Summary of the Blog This Past Week
The Next 20 Years Will Not Be Like the Last 20 Years--Here's Why 6/21/14
Here's What I Recommend in the Stock Market: Zip, Zero, Nada 6/20/14
After 6 Years of Unprecedented Central Planning, the Economy Is More Fragile Than Ever 6/19/14
The Most Destructive Presidencies in American History, Part 2: The Fatal Incoherence of the Bush/Obama Foreign Policy 6/18/14
The Most Destructive Presidencies in American History: George W. Bush and Barack H. Obama 6/17/14
The systemic damage wrought during the last 14 years will not be easily repaired.
Best Thing That Happened To Me This Week
Deck-building last weekend (always fun), and Friday afternoon BBQ with friends before they summer in Suzhou, China: Mexican-style grilled chicken, fresh homemade salsa, red sauce (homemade with Guajillo chiles), lettuce and pan-fried onions, on grill-heated corn tortillas.
Market Musings: Malls
Let's see: the earnings of high-end handbag retailer Coach bombed and Dardens restaurants' net income cratered, yet the stock prices of mall owners SPG (Simon Property Group) and GGP (General Growth Properties) have been climbing toward recent multi-year highs.
Does anyone else detect a disconnect between declining prospects for corporations renting mall space and the the soaring stocks of mall owners?
Let's take a quick look at mall sector leader SPG. Despite weak GDP/retail sales in the U.S., price recently exceeded previous highs on strong momentum. SPG's price earnings ratio is a lofty 38, yet indicators have been rock-solid all year: overbought RSI and rising MACD. MACD appears to be finally rolling over, but given the Fed-driven euphoria for stocks (otherwise known as complacency), a new high is not out the question.
Can Fed euphoria push mall stocks higher as their retail base closes weak stores to bolster sagging net profits? How far can malls climb as retailers face weak sales and rising costs? The 2nd quarter earnings season might provide another boost to the sector if top and bottom lines both beat reduced estimates, but forward projections might disappoint. The sector looks toppy given the high P-Es and weak retail environment.
From Left Field
The Connection Between Oil Prices, Debt Levels, and Interest Rates: "In a growing economy, it is possible to repay debt with interest. But once an economy flattens, it is much harder to repay debt."
D-Day Landing Sites: Photo Overlay of Present-Day and 1944 -- striking, evocative, eerie...
Holding Out in Hong Kong (subscription required) "When Victor Rothschild visited the Avenue de Marigny in 1944, to see what was left of his cousin’s mansion after four years of German occupation, he found not only Baron Robert’s old butler, Felix, on the premises, but also a fat guestbook kept by the Luftwaffe officers to record their social life. He saw to his consternation that their French guests were exactly the same people whom the Rothschilds had entertained before the war." Wonderful story about the resilience of monied Elites....
Momo, the Chinese app that exposes sex and generational divides -- power of the Web writ large....
Masters of Love: Science says lasting relationships come down to--you guessed it--kindness and generosity. (but kindness doesn't sell...)
The Best Way to Invest in China Might Not Be in China: "Last year, the China Banking Regulatory Commission calculated this network of non-bank lenders accounted for a whopping 80 percent of the country's GDP." The shadow banking sector is increasingly looking like China's Achilles heel...
A Man Takes His Cabbage for a Walk: Chinese artist -- proof China is now wealthy enough to support performance art and arty eccentrics....
Inequality, Free Markets, and Crashes (Mark Spitznagel and Nassim Taleb) -- excellent discussion of the consequences of suppressing risk and controlling markets so there can be no clearing of malinvestments...
Empty lots now can be designated agricultural zones -- San Francisco encourages urban gardening--might be a useful model for other cities....
The Maker Movement: Tinkering With the Idea That College Is for Everyone -- it's about time somebody refutes the terribly destructive "college is for everyone" fantasy...
An inconvenient truth about higher education: New documentary takes an honest look at the crisis in American universities (via Joe H.)
It’s Official: The Boomerang Kids Won’t Leave (Home) (via Joel M.) "But over the past 30 years, the onset of sustainable economic independence has been steadily receding. By 2007, before the recession even began, fewer than one in four young adults were married, and 34 percent relied on their parents for rent." -- what I noticed was the absurdly unrealistic expectations for future careers: film director--really? With fewer than 200 feature films made in Hollywood annually, and little money in music videos?....
"Setting an example is not the main means of influencing others; it is the only means." Albert Einstein
Thanks for reading--
charles |
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