|
|
Musings Report 2016 - 29 7-16-16 Globalization's Few Winners and Many Losers
You are receiving this email because you are one of the 500+ subscribers/major contributors to www.oftwominds.com.
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.
Globalization's Few Winners and Many Losers
I often write about the Tyranny of Price, the rarely examined idea that lower prices are all that counts.
Thanks to the Tyranny of Price, quality has plummeted. As correspondent Mark G. has observed, the poor quality we now accept as a global standard wasn't available at any price in the 1960s--such poor quality goods were simply not manufactured.
There is another even more pernicious consequence of the Tyranny of Price: globalization, which makes two golden promises: 1) lower prices everywhere and 2) industrialization that will raise millions of poor people in developing economies out of poverty.
Globalization is presented as a win-win solution: the developed countries get cheaper goods and the developing world get the benefits of industrialization.
But now a new study, "Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies," finds that globalization has been a bad deal for 80% of the people in developed economies, as their income and wealth has stagnated or declined.
A Cheerleader for Globalization Has Second Thoughts: A new study from the McKinsey Global Institute finds that changes in the world economy have left many people worse off.
If we look at the terrible pollution in China, we find that rapid industrialization hasn't been as win-win for developing nations as it has been advertised.
What the punditry is slowly being forced to accept is that globalization exacerbates wealth/income inequalities by boosting the rewards for the 20% who benefit from global markets and coordinated central bank interventions (zero interest rates and quantitative easing) that have pushed asset valuations to incredible bubble heights around the world while reducing the security and income of the bottom 80%.
Domestically, the American ruling class and punditry is struggling to square the circle, that is, defend the globalization of the U.S. economy that has greatly enriched corporations and the wealthy, but also alleviate the stagnation in the incomes and wealth of the bottom 80%.
Correspondent Graham R. summed up the situation very succinctly in a recent email:
“Focusing on the minimum wage is a false flag. The society as a whole is now stressed at every level because Globalism has promised us cheaper prices at the cost of destroying societal structures and their meaning for its members.”
Graham identifies a key consequence of globalization that the mainstream media has ignored: the destruction of social/economic structures that supported communities and provided meaning to their residents.
When price is all that matters, factories and offices are closed overnight and the work is shipped elsewhere. When production costs go up in that region, the production is moved to another locale.
In this environment, workers are competing with workers globally, which suppresses wages everywhere. Since global corporations have gained political power, they can buy political influence that raises the cost of commerce for small businesses--a process known as "regulatory capture" that erects regulatory barriers that stifle competition.
Price is not an absolute good; it is only one kind of information. Since it is easily quantified, it has achieved total domination. Quality, quality of life, and well-being are not easily quantified, so they are ignored. Stagnation, insecurity and a loss of social cohesion are the inevitable result once price is all that counts.
Summary of the Blog This Past Week
"Helicopter Money" Won't Fix What's Broken 7/15/16
What If the Consensus on Small-Scale Toolmaking and Agriculture Is Wrong? 7/14/16
Why Helicopter Money Won't Push Stocks Higher 7/13/16
The Unintended Consequences of the $15/Hour Minimum Wage 7/12/16
Risk On/Risk Off: What Schizophrenic Markets Are Telling Us 7/11/16
Best Thing That Happened To Me This Week
The swelling and pain in my mother-in-law's knee decreased, and she's able to get around her house without a wheelchair. All hail mobility!
Market Musings: Same Old Euphoria, New Highs
We've seen this before, of course: a euphoria that isn't really grounded in fundamentals taking stocks to new heights. It reminds me of Nasdaq in 1999, when the tech index soared from 3,000 to 4,000 in a matter of months, and that seemed an incredibly over-valued bubble top.
Then the index climbed to 5,000 before finally cracking. The Shanghai index traced a similar bubble, reaching mania heights and then extending to even more manic levels.
I've marked up a weekly (long-term) chart of the S&P 500 to see what technical analysis might tell us about these new highs.
MACD is still rising, suggesting higher highs ahead. But there is an interesting divergence developing between the histogram and the MACD, suggesting this next rise will not last long.
The spike above the Bollinger band signals a near-term reversal. These sorts of dramatic spikes above or below the BBands are inevitably followed by a move back inside the BBands.
The stochastics are still rising steeply, suggesting a topping out in the overbought region above 90 in a week or three.
As is often the case in manic rallies, the daily leaps have left multiple open gaps in the chart. There are four open gaps between 2,160 and 2,100, gaps which strongly suggest a near-term decline will fill all those gaps and bounce off 2,100.
But there are big open gaps below around 2,040 and 2,005, and another major gap around 1,860 that will all get filled.
Bulls are confident these gaps will never get filled, but history suggests open gaps almost always get filled, usually sooner rather than later.
Putting these pieces together, it seems likely that the SPX will take a breather and fill the 4 open gaps down to 2,100 (a drop of 60) and then surge to new highs around 2,250 - 2,300 before exhausting the euphoric sentiment. Once MACD and the stochastics top out and roll over, perhaps the SPX will get a meaningful decline and drop back to fill that gap around 1,860.
That would require a decline of 300 points, or 13.8%.
October has the reputation of being the "crash month," but big declines often occur in August and September.
From Left Field
Some reflections on the Twilight of the Oil Age - part I
Magnificent New Instrument Makes Music with 2,000 Marbles (4:32)
The Iran Deal Worked -- and hence the Saudis' unease...
What Lake Mead’s Record Low Means for California: After 16 years of drought in the Colorado River Basin, Lake Mead has hit its lowest point ever. (via Joel M.)
One striking chart shows why pharma companies are fighting legal marijuana (via lew G.)
"There's a body of research showing that painkiller abuse and overdose are lower in states with medical marijuana laws."
Genocide by Prescription: The ‘Natural History’ of the Declining White Working Class in America
New Role for the Immune System: Controlling Social Interactions: “The brain and the adaptive immune system were thought to be isolated from each other, and any immune activity in the brain was perceived as sign of a pathology. And now, not only are we showing that they are closely interacting, but some of our behavior traits might have evolved because of our immune response to pathogens."
Poor musical taste? Blame your upbringing (via Lew G.)
The world that we hear shapes the music that we like. -- a good reason to play a wide variety of music at home when the kids are young...
The case for Worker Democracy (via Lew G.)
How Did China's GDP Beat? By "Shoveling A Stunning Amount Of Cash Into The Economy "The amount of cash Beijing is shoveling into the economy is stunning."
As Japan's population shrinks, bears and boars roam where schools and shrines once thrived (via Fred R.)
Life-Hacks of the Poor and Aimless: On negotiating the false idols of neoliberal self-care
"We cannot live only for ourselves. A thousand fibers connect us with our fellow men." Herman Melville
Thanks for reading--
charles |
|
|
|
|
|
