Dow 16K: Fake or Real?

Speaking as an investment professional of three decades – not, NB, as a prognosticator (we ought all to heed the OT condemnations of sorcery and divination) – the 16K DJI does not seem to me to be quite wholly a case of irrational exuberance, in that I can see a reasonable argument for it. As Proph recently wrote to me:

So maybe the best we could say is that the [financial markets are] completely rational given the complete irrationality of the prejudices of the age?

Yes. Included in the information processing system of the species – of which the financial markets are an important organ – are all the defects thereof.

Particularly, these days, that government idiocy has so increased the cost of employment that almost all firms are refusing to hire, instead pouring all their (considerable) profits into automation that will permanently reduce their demand for workers, increasing their profitability, and thus their market valuations.

This is a process that can continue for some time. Consider the knock on effects of the Industrial Internet – hooking up machines to the internet – which is only in the first few months of implementation. They are absolutely immense. Ditto for fracking. Ditto for automated cars (the increase in transport efficiency could be staggering, and all of it reaped via relatively stepwise investments in automotive automation – no immense rebuilding of the roads, but rather just making cars marginally smarter than they were last year). Ditto for robotics, nano-tech, 3D printing.

The list goes on and on. Our whole industrial sector is undergoing a phase change, just like what happened to agriculture when the fruits of the industrial revolution began to be applied to it. Retail, too: Amazon is going to displace about 2/3 of the brick and mortar sales outlets, by some estimates. Even the efficiencies due to pervasive deployment of smart phones are only just clicking into gear.

The private economy, in other words – and by this I mean the real economy that moves mass around and provides services, not so much ephemera like Twitter and Facebook – offers the prospect of massive, permanent increases in profits. But such increases always feed through to reductions in prices (such as Amazon’s reduction of shipping costs to $0). The prices of industrial goods are set to drop precipitously, just like those of ag products did when ag was industrialized. So are the prices of ag products, for that matter.

But all this just means that we are going to have more and more wealth to spend on social dysfunction and vice. Unemployment is likely to get worse and worse, as the industrial sector need for manpower vanishes.

It needn’t, of course. If the employment market were free and efficient, anyone who wanted to work could find gainful employment in the real economy, or even the good economy. Look at organic foods, or craft beer, or any of the other high quality items that people are more and more demanding. There’s lots of room in those sectors for more competition, and dropping prices, and employment. But that isn’t going to happen.

So apart from the occasional periodic crash, of the sort that are almost guaranteed to recur from time to time, we can expect corporate profits to keep climbing, even as unemployment and social dysfunction keep compounding. Technology may enable us to avoid a total crash, that would force us to correct the social dysfunction. So, it’s a lousy, delicate, vulnerable state of affairs. I don’t expect it to last – too unstable.

When it comes, the crash – and by this I mean, not the next market correction down to a DJI of 12K, but the real Collapse™ that Proph writes about, the Collapse™ we trads all anticipate with a mix of eager gladness and terror – is going to be generated by an explosion of social dysfunction, not by a failure of the private economy to generate increasing wealth.


The Real Economy and the Fake Economy are de-linking. The Fake Economy has added so many costs to the price of labor that the labor market is languishing. No one’s buying labor at that price. They’re buying capital goods instead – that’s what you’re generally doing, when you buy stocks or bonds – which will structurally reduce the demand for labor.

Fake wages will keep growing, fake jobs will keep being added. But real household incomes will not grow, because as the Fake Economy adds jobs, the Real Economy is going to shed them, big time. Proph wrote also:

What baffles me is how we can sustain a move toward a functionally labor-less economy.

That is the central problem of the technology revolutions. It won’t do us any good for everything to get cheap as chewing gum, if no one has any employment income. As private sector demand for labor crashes, how will people earn the money to buy the dirt cheap iPhones? The rational way to solve the problem is to let people earn money by supplying goods and services to each other that they really value – origami supplies, liturgy, fun movies, comedy, artisanal cheese, whatever. These are in the final analysis all species of our affection for each other and for the creation. People make artisanal cheese, not just to earn a buck, but for love. The laborless economy then is really only the economy that has succeeded in automating the sort of work that people cannot love for its own sake, like mining coal.

NB: there may be almost no such occupations out there. Almost every line of work has an inherent fascination for certain types of mind (for, there is no part of the created order that is not reflective of the beauty of her Creator). I loved being a woodcutter, one of the lousiest jobs I can think of. I even enjoyed washing dishes in a restaurant. The only sort of work that is hard to love, really, is work that is pointless, like being paid to dig ditches and then fill them back up, or do anything else that no one really wants done. Many modern jobs fall into that category; almost all the fake economy falls into that category.

But even if the only sort of work available was of the creative, interesting sort that simply cannot be automated, there are always going to be lots of people who have nothing of value to offer other people, either because they love nothing very much, or have not the talent, initiative, mental health, or intelligence to provide it. For them, there are two options: either welfare (or make work – same thing) – which by subsidizing vice vitiates virtue, compounding the problem from one generation to the next: or else, true charity, such as the monasteries once offered to all in need. Since Henry VIII, the West has chosen the former.

Clearly the latter is preferable, if only because it does not subsidize vice. One of the things that those who are lacking in talent, intelligence, and so forth can always offer to society is their charitable work. If you can’t find useful employment providing something your fellows value enough to keep you flourishing, so that you are destitute, you should be able to knock on the door of an abbey and find useful employment there – and a life of value, meaning, significance, indeed even sanctity.

Will we change course away from welfare and back toward charity? That’s the question of the laborless economy. I rather doubt it. If we don’t, then look for an eventual explosion and collapse triggered, not by technics or markets, but by social devolution. If we do, then something like a golden age could happen (setting aside such challenges as are always with us no matter what, e.g., Islam, China, etc.).

59 thoughts on “Dow 16K: Fake or Real?

  1. The tech revolution will also create scarily effective and efficient means of enforcement of order too. Drones with the size and ubiquity of insects, etc. So the boom and dysfunction could go on for centuries, with the morlocks ruling over the eloi for their own good. My baseline expectation is that it will, absent some black swan event like a meteor strike.

    But yeah, back down to earth for the moment, I think the market indices are pricing in reasonable expectations of reality right now.

    • Ha. Zippy you just described the new Robocop movie. Scarily efficient drones. Except I think your idea of tiny drones is more likely than the gigantic ones in that movie, which is not actually that bad.

  2. I am not really sure I see the great distinction between the “real” and “fake” economy both represent integral aspects of consumer capitalism. The movement from the “production” economy of the 19th century to the consumerist economy of today was simply the logic of capitalism playing itself out. Capitalism is utopian because the entire ideology is predicated on limitless expansion. America despite being only 9% of the world’s total population consumes nearly 40% of the world’s resources. Contrary to libertarians and other American “conservatives” the American “model” simply cannot be exported to the entire world.

    The world needs to discover the meaning of limits in both the economic and moral sphere if it wants to avert a civilization catastrophe and not simply “enjoy the decline.™”

  3. Living off welfare or living off monastic charity? Both sound about equally awful to me.

    I’m also much less impressed with technological advance in recent times than you guys seem to be. I don’t see anything around the corner remotely of the same magnitude as last century’s agricultural revolution. After all, the reason we have all that cheap stuff at Wal Mart isn’t automation; it’s Chinese cheap labor.

    And you’d have to tie me up and throw me kicking and screaming to get me into an automated car.

    • Sure, being an astrophysicist beats either of those alternatives. Ditto for being an investment advisor. But if I were down and out, I’d much rather fall back to a dignified way of life as a monastic ward, earning an honest day’s keep on the farm, than taking welfare. Especially if welfare were not available in the first place, which is the alternative I’m proposing to our current system.

      I share your repugnance for automated cars. I’m still reaching for the stick every so often, and disconcerted to find it missing …

      Finally, it isn’t technological advances recently that offer to transform industry, but the logic of their implementation throughout the industrial economy.

      My own biggest concern with the next wave of industrialization is its extreme vulnerability to things like hacking, viruses and pulse weapons. Don’t stop owning guns, fireplaces, and candles …

      • Anyone Ortho’ wants to head out to Oregon and celebrate guns, let me know, I’ll set up some courses of fire. My church has an ammo budget. It’s a very normal looking middle class church, nobody ever expects the ammo budget and the non 501(c)3 status. We very easily pass as regulars. Heh heh.

    • Bonald:
      Chances are you are already driving an automated car, and it is just going to get more automated over time. Many airliners are fully fly-by-wire and can land without a human at the controls, and newer small airplanes can fly themselves for most stages of flight. The competition for Chinese labor isn’t American labor as much as it is automation.

      Automation is still expensive relative to exploitation of the poor and is still limited in what it can do, but the poor aren’t getting any cheaper or more flexible as a fungible consumable resource — automation is.

  4. You assume that the losers are just going to take it and be grateful recipients of whatever charity the winners in the tech revolution are going to throw at them.
    But why would the losers obey Non-aggression principle?
    It would not do to be addled by a delusive libertarianism.
    Normal political processes are limited and all people retain the ancient right to transgress the political process if they are not satisfied with it.

  5. Correct me if I am wrong, but the Church authorizes the State to adjust private property as to achieve common good. And this adjustment is not charity but justice.
    For instance, huge landed estates may be redistributed.

    • Yeah, but that dimension of political economy was not addressed in the post. All I discussed there was the difference between coping with indigence and destitution by welfare versus monastic charity. No matter how just your state may be, anywhere other than at the New Jerusalem there is going to be some destitution and indigence. How best to deal with it? I say monastic estates.

      • Why do you believe the monastic order you will be forced to join in order to receive charity will be one you agree with? Seems to me that state could easily state anyone who doesn’t join The Monastery of Political Correctness doesn’t qualify and can go starve to death. Heck, isn’t that a little of what we already have (if you oppose PC too openly you usually can’t advance in most careers, it may even cost you your job).

      • Who said anything about joining a monastic order? Very few of the wards taken in by the monasteries would ever have been, or ever would be, considered fit for the religious life. Nor would a ward of a monastery have to agree with the doctrines thereof.

  6. Deserving poor–widows, orphans, indigent elderly, sick and handicapped etc should receive State Welfare.

    Undeserving poor are proper objects of charity.

    State welfare is not charity. State can not do charity. For the proper end of state is justice.
    Thus welfare (i.e. what is owed in justice) should not be confounded with charity.

  7. At the moment the Dow is above 16K. It is real in the sense that it is tradable, e.g. as an ETF. It may go higher or lower, but it won’t last forever. Carl Sandburg expressed the thought in his poem Limited:

    I AM riding on a limited express, one of the crack trains of the nation.

    Hurtling across the prairie into blue haze and dark air go fifteen all-steel coaches holding a thousand people.

    (All the coaches shall be scrap and rust and all the men and women laughing in the diners and sleepers shall pass to ashes.)

    I ask a man in the smoker where he is going and he answers: “Omaha.”

  8. I am not nearly so optimistic about the shining techno-topia as you all seem to be. In many realms, technology is of lower capability than it was in decades past, automagic cars aside.

    It is improbable that we will ever get to 1/10000 people employed paying welfare to the other 9999. Especially given the pool of elites and STEM folks we’re working with.

  9. “Look at organic foods, or craft beer, or any of the other high quality items that people are more and more demanding.”

    How much craft beer can one rich person consume? There is a point at which these artisan crafts reach satiation point, and many people couldn’t produce this stuff anyway. If only a tiny fraction of humanity has all the wealth there is a very limited consumer base for these sorts of things.

    • Beer as such is a luxury good. It is produced from agricultural surplus. The greater the number of people engaged in brewing for love, the lower the price of beer, all other things held equal. So, you don’t need to be wealthy to buy quality beer. This is already true, even with our totally deranged markets.

      … only a tiny fraction of humanity has all the wealth …

      That’s a communist shibboleth. It just isn’t true. People all over the world (outside of the hell holes ruled by wicked tyrants) are wealthier than ever. The poor are not as wealthy as the rich, to be sure, but God has told us that this is something that will not change, this side of the eschaton. *It doesn’t matter.* What matters is that the poor are getting wealthier, almost everywhere. This is the source of the tremendous moral hazard implicit in high civilization: the great wealth it generates cushions people from the ill consequences of vice. So, you get more vice. If there’s enough vice, the social order of the polis breaks down, and the high civilization can no longer be maintained.

      • “What matters is that the poor are getting wealthier, almost everywhere.”

        Except the entire first world for several decades now. And even in the third world growth is mostly a function of lower labor and environmental standards.

        I’ve watched plenty of hard working Joe’s who play by the rules get fucked hard for decades now. The idea that they are all going to become craft beer makers that sell a product none of them can afford to each other is laughable.

        The net impact of what you’ve wrote is that demand for labor is going to fall to the point where you aren’t even worth enough to capital to keep alive.

      • Check your stats on first world wealth. How many gangbangers had supercomputers in their pockets in 1980?

        The net impact of what you’ve wrote is that demand for labor is going to fall to the point where you aren’t even worth enough to capital to keep alive.

        This was one of the main points of the post. When it costs almost no labor to produce any of the necessities of life, how will people earn the money they’ll need to purchase the necessities of life? That’s precisely the problem of advanced civilization. Clearly it is stupid, and wicked, to keep people employed in horrible jobs that once had to be done by humans in order to produce the necessities of life, but that can now be performed by machines. Even worse to keep them in mindless pointless jobs that *don’t even produce something that anyone wants to buy.*

        How then shall people earn their money? By producing what we now understand as luxuries, or ought to. Facebook, for example: completely an exercise in excess, a massive investment in gossip and leisure. Or heritage apples. Or something. When the necessities are super cheap and plentiful, then it will the the superfluities that command the margins. Which superfluity? You got me. There are millions of them. Moustache wax. Buggy whips. Armor and weapons for re-enactors. Ancient liturgical music (one of my own schticks, that I actually earn money on). You name it.

      • Check your stats

        You are debating a professional statistician/mathematician, prepare to lose this argument.

        By producing what we now understand as luxuries, or ought to.

        Facebook: Designed by a 145IQ+ genius that mostly employs other people 2SD+ in IQ (and still lobbies to bring in foreigners to lower wages).

        Have you ever met a gangbanger? Could you even imagine allowing him to perform a service for you? Do you think he would actually succeed? There was once a time where despite his complete incompetence and ability to produce much of anything with any value he still had a strong back, and before robots we needed strong backs. That day is long gone.

      • Thanks! Fantastic work! The two charts you link *make the argument of the post.* Notice that real hourly wages began to languish just when productivity and family income diverged, at the beginning of the Carter Administration. The gold window had just been closed, the EPA created, and we entered a decade of stagflation, from which it took us the Reagan and Bush I administrations to recover. But never mind all that ancient history: the charts you link would seem to document the falling real demand for labor that I discuss in the post. It’s a structural change.

        A guaranteed national income is one way to tackle the problem of mass underemployment. Certainly it’s an idea that gets a lot of respect from many traditionalists. But in the final analysis, I think it comes at too great a risk of totalitarian state control.

      • Are you fucking kidding me?

        Wages where higher in 1972 then now. During the evil days of 70% tax rates and regulation.

        Real wages fell dramatically under Reagen and Bush.

        This is interesting (sort of, its common). My charts show that you are dead wrong, and yet you take it to mean you were right. Even in your reply you mention two periods where the data shows the complete opposite of what you claim. I assume this free market/republican team affiliation stuff is practically scriptural to you at this point.

      • Surely you can see on the chart you linked, as well as I can, just when it was that real wages began to fall precipitously. It was in *1972,* the beginning of the decade that was (so far) the apogee of social democrat economic policy. Yes, wages continued to fall during the Reagan years, although not nearly as fast as during the Carter administration – like I said, those years only slowed the rate at which the vicious effects of that disastrous economic policy compounded. Reagan’s policies took several years to work their way down to hourly wages, but they did; wages eventually stopped falling, and then started to climb again.

      • I see. We aren’t matching things up to the actual time they happened, but time + X where X changes from presidency to presidency and decade to decade to show whatever it is you want (and Nixon is a democrat). And also we aren’t even contemplating the “was life better decades ago question” because anyone can see the wage rate is lower today then the bad old days.

      • You’ve come to the wrong sort of site to find an argument that life is better now than it used to be.

        And we are matching effects to their causes, which naturally preceded them in time. It takes a long time for the effects of big policy initiatives to permeate an economy as large and complex as ours. The effects of Obamacare, for example, will not be fully felt for about a decade, if even then. I mean, they are already pretty bad, but this is only the beginning.

  10. “It needn’t, of course. If the employment market were free and efficient, anyone who wanted to work could find gainful employment in the real economy”

    Then why aren’t they? This isn’t some new phenomenon. And we all know good men out of work. Because they won’t work in polluted factories till they drop dead like in China. I can’t wait to our glorious future of zero labor or environmental standards that keep holding people back from their glorious slave like existence.

    • No, a lot of people are out of work because they define work very narrowly and won’t take any other job, even if the pay is commensurate. If all you will take is an air-conditioned office manager position with full benefits and a month’s vacation each year, it’s going to be a long time before you find employment, if ever (in many cases this is what people looking for their first job after college expect).

      All work not as described above is hardly polluted China factory work. But keeping the false dichotomy going that these are the only two options is part of why unemployment is so high.

      • If everyone tomorrow decided to become a welder how long do you think welders wages would hold up before they collapsed? And how long till someone develops automated welding machines? And what do welder’s today make relative to the past, are they not falling behind too? You’re throwing out a bunch of ideas that don’t scale.

      • And you are running all your hypotheticals using static analysis. In reality, it never happens (outside places like the USSR) that everyone goes into welding, precisely *because* if they did it would no longer pay to go into welding. When margins are low in the welding business, people look for other sorts of opportunities. There’s nothing pernicious in this; it’s plain common sense. So, when the pickings are slim in the craft beer business, people will look elsewhere for unmet needs, where the competition is less and margins are better.

        What we’ve got right now is a system where the margins are best in government “work.”

        Which would you rather have: a society where more than half the people spend their days producing goods and services that no one wants, or would pay for if they had a choice, such as we now have; or a society where everyone had to find a way to make a living by providing *something or other* that other people wanted enough to pay for it, or else become a charity case?

      • You talk about unmet needs. Which ones? There are no unmet needs. There are discretionary things the wealthy want, but those require a level of skill/IQ/connections that are inherently scarce.

        You seem to have this idea that the magic pixie dust of the market simply means new jobs will constantly replace old ones. This assumes that there is a demand for labor. There isn’t, at least there isn’t for any labor below an ever increasing threshold for inherent ability (IQ, looks, natural skills). And the concentration of wealth actually exacerbates this problem (the rich only want luxury goods, but generally luxury goods can only be produced by the highly skilled class that most people don’t have the natural ability to join). Yes, for a long time that worked, but it stopped working in the 1970s. How many decades does it take to realize its broken?

      • You are making the argument of the post. Perhaps you should read it again, more carefully.

        … there are always going to be lots of people who have nothing of value to offer other people, either because they love nothing very much, or have not the talent, initiative, mental health, or intelligence to provide it. For them, there are two options: either welfare (or make work – same thing) – which by subsidizing vice vitiates virtue, compounding the problem from one generation to the next: or else, true charity, such as the monasteries once offered to all in need.

        How woud *you* suggest we solve this problem? Keep men in the coal mines even though they aren’t really needed there anymore? Expand the DMV by a couple million percent? What?

        Seriously, I’m curious to hear your ideas.

      • I would provide them a universal basic income and some kind of guaranteed medical care. What they did after that would be their own business (they could waste away or develop themselves as best they can) but at least they would do what they do voluntarily and not out of utter desperation just to survive. It would also have a very positive effect on our society and politics (winner take all societies tend to develop a law of the jungle ethos).

      • OK, that’s a solid idea. I’ve entertained it myself. Indeed, so has Milton Friedman, in the form of a Negative Income Tax. Dick Nixon was all excited about it; that’s why we now have the Earned Income Tax Credit.

        But a guaranteed national income comes with a great risk of a dire consequence: that everyone becomes a ward of the state, and subject to the control of the state. If the state is all nice and humane and libertarian, no problem. But if it has any moral defects, big problem. Then you get things like the one child rule, or forced euthanasia for oldsters, or enforced universal support of pederasty, or the like.

        This discussion is interesting to me, because you are basically where I was in 1970. Then I moved to libertarianism, and the Negative Income Tax. Now I am a traditionalist, and I favor enclosing the political commons to achieve the same end as the Negative Income Tax, while ameliorating its tendency to totalitarianism.

      • What I would definitely not do is state:

        1) If you want the UBI you have to do XYZ that the government demands, thus the government now basically shapes society any way it wants through fear and desperation.

        2) Your on your own. Hopefully someone gives you charity. If not, die. If so, do whatever they demand of you to receive the charity no matter ho demeaning, or die.

      • What’s UBI?

        So, I get that you don’t want the government bossing people around; that’s your rejection of #1. Within limits, I agree. But if we are not going to rely on charity, and we don’t want people dying in the streets, then so far as I can see the only alternative is for them to “do what the government demands” so as to get their cheese from the government. And this sounds just like your #2: “do whatever they demand of you to receive the charity.”

        Beggars can’t be choosers; that’s not a rule of Kristor, it’s a rule of the universe. But if I was at my rope’s end, then I would rather put myself in the tender care of the Sisters of Mercy than be the ward of the pitiless DMV. Especially since, if the DMV had not forced all the charities out of business – which is now happening – I would be able to walk from the Abbey of the Sisters over to the monastery of the Little Brothers of the Poor.

      • UBI = Universal Basic Income.

        You pick a number below the median wage but enough that people don’t live in poverty and you give that to every single citizen. No strings. No conditions. No means testing. You just give it to them. It’s not all that unlike how Alaska pays every single citizen a dividend of $X from their oil revenues.

        This is not charity (because its automatic). Charity is up to the optional whim of individuals and can fail. As it does today. Go to your local church and say “I need an expensive operation.” They will tell you they don’t have the money. And if they happened to have the money for you they wouldn’t have it for the 100 other people that showed up the second they heard. In the modern world providing the basic needs of people (including medical care) in any reliable sense requires a forced taxation regime.

        “Beggars can’t be choosers”

        In the robot and AI future the median individual will be a beggar. If he wants to be a chooser he better demand it via a government that represents his interests rather then hoping for the noblesse oblige whims of an ever shrinking and largely heritable capital class.

      • Ah, but if you went to your local hospital, run by the Sisters of Charity or the Methodists or their ilk (as all hospitals once were, and many still are), they’d take you in and give you the operation. Until Obamacare, this was routine.

        But, again: a single blog post can’t cover just everything. In the robot and AI future, it suggested, almost everyone will be superfluous when it comes to the provision of the basic necessities of life to all of society. How will those people earn their bread? When everyone gets a guaranteed income, you can bet that the guaranteed income will be the poverty line. To rise above poverty, people will need to sell something valuable. Those who can sell something valuable will do OK. Those who won’t, won’t. It’s always been that way. It always will be that way.

      • This is false. When my Dad was sick, when I was sick, the Christian hospitals did not give us treatment for free. Stop spouting lies.

      • Bless you, asdf, but you are simply wrong about this. Check out this page on the website of the Saint Anthony Hospital in Pendleton, Oregon, about their program for providing discounted or free medical services to the indigent. It took me about 30 seconds on Google to find such a site. There are many, many more. For example:

        Example Scenario – A patient with number in household of 3 and total Reported Income less than or equal to $36,620 is eligible for a financial assistance discount of 100%.

        I’m not lying. You’re just wrong, that’s all. I’m not suggesting that what actually happened to you and your father didn’t actually happen. There are I feel sure some hospitals out there that are Christian only in name, as Notre Dame University is Catholic only in name. But Christian hospitals have historically almost always devoted substantial sums to the care of the poor. It is what they were founded to do.

        I urge you: be a grown up, and admit it. You don’t have to do so here, of course; but do, I pray, allow this little bit of light to penetrate the abyssal darkness of your heart. There is another world out there, that is not against you, particularly. Allow yourself to admit it.

        I can tell that you are suffused with rage at the way life has treated you and your father, and I do feel sorry for your misfortune. But you would do better to resist the urge to lash out; to take a deep breath and think calmly. No matter how society is arranged, some people are going to have horrible lives. Sure, our social arrangements are to blame for some such things; but this would be true of any social arrangement. There is no Golden Age that we once had, nor will we ever be able to arrange one in the future. So, we should not try. All we should try to do is arrange for sensible policies, and lead honest, upright lives.

    • Then why aren’t they?

      Because the labor market is neither free nor efficient. That’s not the only thing that prevents full employment, but it’s the main thing.

      • Taxes are lower then they have ever been. And we already went through big time deregulation in the 1980s. If all this free market stuff was why things don’t work then we’d have seen it over the last few decades. We’d also expect all those evil socialist places like the Nordic states to have collapsed, but instead they have a way better standard of living then us.

      • Taxes are lower than they have ever been? In 1900, Tax Freedom Day in the US was January 22, for a total tax burden of 5.9%. Last year it fell on April 18. Think about that for a minute. What would you be able to do if your total tax burden was only 5.9%? Hell, the sales tax alone in California is more than that.

        Deregulation in the 80’s? That just took the edge off the massive tsunami of regulation that had been added over the course of the 70’s. The Reagan Revolution was a pause; it was the pause while the regulatory engine clutched so it could move into higher gear. And since then, the regs have metastasized. Now, your toilet and your light bulbs are regulated. And your medical treatments.

        Despite all that, we are much, much wealthier than we were in 1980. Many of us carry around what would have been considered supercomputers in those days. It’s not an altogether good thing …

      • “Despite all that, we are much, much wealthier than we were in 1980. ”

        Strongly disagree and don’t believe you have a valid case.

        Median income has been stagnant since the 1970s. Worse the farther down you go. Electronic toys don’t make up for being unable to afford decent housing, education, and medical care.

        I remember what life was like growing up. Overall it was a lot better, even if I have a iphone now.

        “What would you be able to do if your total tax burden was only 5.9%? ”

        With a total tax burden of 5.9% and no regulation I would be dead today. My father would have been fired from his job (which the company tried to do twice despite it being illegal) because he had pre-existing medical conditions that drove up their insurance costs (a regulation prevents them from firing him if he gets sick unless it makes him unable to do his job). Destitute and unable to afford medicine he would have died in the street as I would have. Even today not being on Medicare would have the same effect.

        In addition I remember stories from that time with 5.9% tax rates. Of my grandfather fighting strike breakers in the street because they dared to ask that they not be forced to use dangerous chemicals that were fucking up their lungs and then be fired when they couldn’t work anymore.

        But hey, lowering the tax rate 50% since what we all look back on as a golden age of America in the 50s and 60s just wasn’t enough. How about you complain some more about how the hedge fund set should pay because my Dad doesn’t deserve his Medicare and should just drop dead in the street.

        Most of the developed world has higher tax rates and better standards of living. They have that evil socialized medicine that gets the same results for half (or even better) of the cost. They have shorter hours, less risk, less stress, and better educational opportunities. You’d think if all this tax and regulation stuff was the end of the world you would actually see it in those countries, but you don’t. It turns out giving them a safety net actually empowers them to live better lives rather then desperately flail around hoping they make it through another day.

      • So things are great now, compared to the 70’s? Or wait, no, you just said things have been lousy since the 70’s. Which is it?

        What do *you* think we should do? Soviet stuff? Is that your ticket to Eden?

    • In many ways, yes, things are worse now than they were in the 70s. And in many ways they are worse than they were in the 50s, or in 1900. In other ways, they are better. Our moral and economic order is in many ways vastly degraded, as compared with the 70s. In raw terms, in terms of statistics on inflation adjusted family income, we are better off (especially since there is no way to account for things like iPhones in terms of incomes circa 1970). But we have paid a heavy price for that, in the form of family disintegration, nihilism, moral depravity, and so forth. Crime is way down, true; except where it isn’t. Family real income is OK, but it is much, much harder for a man to support a family on a single income.

      But, you know, I can’t cover just *everything* in a single blog post. The post was about the fact that we have this high civilization that is able to crank out tremendous wealth, that is about to reduce demand for employment in hundreds of job categories the same way the industrial revolution reduced demand for agricultural employment. So the wealth generation is real, meaning that current market valuations are at least arguably reasonable; but, the future looks really messed up for the labor force. What are they all going to do to earn money? The only alternatives I can see is either they produce stuff no one wants, and we pay them fake money – “they pretend to pay us, and we pretend to work,” as they used to say in Poland before the Iron Curtain fell – or else, people work at producing stuff they and (hopefully) their customers will love. The latter seems far more humane to me than the former.

      As I pointed out in the post, it does leave open the problem of those who simply *can’t* produce anything worth buying. But, “the poor are always with us.” The question then is, how best to ameliorate the predicament of the poor? I believe true charity is far preferable to servitude to the state.

      • “In raw terms, in terms of statistics on inflation adjusted family income, we are better off”

        I do not even agree with this premise. The statistics do not show this. See above.

        Is this not scandalous to you. Three decades with zero progress (negative below the median). WTF happened? We can fit a super computer in your pocket and most people are poorer.

        ” I believe true charity is far preferable to servitude to the state.”

        “True charity” means people dying in the millions in the street ever ready for a demagogue that will put an end to their misery and deprivation. We will get income from the state. It will either come from a society full of people that accept this and try to make it work in a reasonable way or from a desperate mass pushing it through against a bunch of resentful plutocrats with all of the disaster that entails.

      • The statistics do not show this.

        Well, there’s lies, damn lies, and statistics. One of the many ways that we are all wealthier today than we were in 1970 is that anyone with an internet connection can mine data with the big boys. While I don’t disagree that real family income has not grown at what I would consider a satisfactory pace since about the middle of the Nixon administration, I would point out that, as the charts you linked show, things fell apart with the disastrous Carter administration. Not that it was all Carter’s fault. He reaped the whirlwind. He inherited the Great Society from LBJ, which Nixon had not even thought to challenge. It was the 70’s which saw the Great Society begin to produce its morally and economically vicious knock-on feedback effects – in which the vicious cycle began seriously working – at the same time that the currency became finally and completely unmoored, and regulation soared. It was three body blows at once.

        Then came the 80’s and 90’s, and a bit of a reduction in the rate of compounding of that disaster. Real median family income rebounded sharply:

        Now, notice when household income began falling again. It was in 2000. The decade since 2000 has seen a number of serious market and economic crashes, of which this latest one is the worst since the Crash of 1929. It has seen an incredibly costly war on terror, and steadily rising taxes, steadily increasing regulation, and steadily depraving morals. How surprising is it, really, that incomes are down, given this array of real economic challenges?

        Yet even given the recent difficulties, and even given our dissatisfaction with the growth of real incomes, the slope of the curve since 1980 is still positive. Good news, right? Not so much. It now takes two jobs to achieve that increase in income:

        So, asdf, you have a point. Insofar as you do, you reinforce the argument of the post.

  11. The 80s and 90s were debt fueled increases in asset prices as our manufacturing base was gutted. When all of that debt fueled growth came due in the 2000s we had a massive decade long recession basically. Nobody in the middle class benefited from this at all, all of the asset inflation went to the extremely wealthy (who owned all these politicians you seem to think gave a remote shit about you). Much of the deregulation of the financial players that allowed this was done in the name of all this free market stuff you love.

    Things did not get better because of Reagen and Bush. Reagen and Bush didn’t give a shit about you. Handed a bunch of money to bankers and defense contractors while he flooded the country with Mexicans and shipped your job abroad. I lived through this time. Things got worse and worse and worse. Nobody my Dad worked with is better off now then 1980 when your buddy came to power.

    The strong welfare state, high regulation, high tax policies of the 50s and 60s created an unprecedented golden age of broad based prosperity for everyone. But you people needed to start an expensive war with Vietnam and back the Israeli’s until we got the oil embargo. Then you blame it on the fact that plutocrats have to pay back from their billions, people don’t die because their sick, and men can’t be bullied and lose their jobs because they want safety standards.

    What a Christian.

    • Stop spluttering and start thinking. Good Lord, man, you aren’t even spelling correctly.

      If you really honestly believe that bureaucratic Social Democracy is the cat’s pajamas, then you do indeed adhere to a fantastic religion that I do not share, and our view of the world is fundamentally, diametrically opposed.

      What I don’t understand is, since you do evidently believe that bureaucratic Social Democracy is the way to go, you are not overjoyed at the course upon which we are currently embarked, and have been since the Roosevelt administration. Why are you so incredibly enraged? If Social Democracy is so great, how do you explain the horrors in average hourly wages etc. that you decry, and that have all been generated under policies of the sort that you love? I mean, maybe we’re a little less Social Democrat than we were in 1970, maybe a little more; maybe less in some ways, more in others; but it’s really all been the same basic policy regime since the mid 60’s, with just trimming here and there. Apparently, it isn’t working! So, you want to double down on it?

      This makes no sense to me. It smells of fanaticism.

      • Today’s policies bear no resemblance to the gold age.

        Golden Age:
        No immigration
        No affirmative action
        No political correctness
        Strong worker and union protections
        Strong protections against trade with third world countries that don’t have labor and environmental standards
        Strong regulations against predatory capitalism in a variety of industries, and especially in industries most vulnerable to it (finance, etc)
        High taxes on super high earners leading to more egalitarian income distribution and a strong middle class

        Mass immigration
        Mass affirmative action
        PC witch hunts
        No protection for workers or unions
        Free trade with third world shitholes in a race to the bottom
        Deregulation of all sorts of corporate malfeasance directly leading to devastating financial bubbles amongst a host of other problems
        Low taxes on high earners, nearly all wealth gains to the top 0.1% who largely acquire the money through theft and anti-social activities (financial scams, etc). Evisceration of the middle class.

        These are wildly different policy regimes. And it doesn’t have to be this way. Other countries didn’t adopt all of the things we see under the “today” tab. Many kept protections for workers and a middle class. Others were able to stop immigration and PC bullshit. Did American capitalist free market worship stop anything? We got the worst of every possible world.

  12. As I pointed out in the post, it does leave open the problem of those who simply *can’t* produce anything worth buying. But, “the poor are always with us.” The question then is, how best to ameliorate the predicament of the poor? I believe true charity is far preferable to servitude to the state.

    Charity is no substitute for justice withheld- St. Augustine

    The post was about the fact that we have this high civilization that is able to crank out tremendous wealth, that is about to reduce demand for employment in hundreds of job categories the same way the industrial revolution reduced demand for agricultural employment.

    Who knows what the future holds, but it seems to me that the world is fast reaching a point were it simply cannot accommodate another Industrial Revolution type event. We are already looking at severe oil depletion. How much “innovation” is being done to address this problem? What of other environmental catastrophes?

  13. ASDF, I live in ground zero for giving people an easy living with no need to work. Cascadia is not a paradise. It’s horrible for any children to grow up never seeing adults work. What you propose regarding income is cruel.

    As for all the rest, if you really think that a 1970s home with no central heating, no central air conditioning and low quality insulation is better than a modern home with those things (that is also 50% larger), then you offer that to people and see how many take you up on the option of living under 1970s middle class standards. Complete with all the weird little economies we now associate with industrious poor, but not middle-class people.

    • I would rather live in a 1970s house in a safe neighborhood with a mortgage I can afford then a 2013 house in a shitty one with a mortgage I will never pay off. Yet the number of safe neighborhoods is much smaller, and the amount you have to pay to live in one has skyrocketed.

      I see the standard of living of my Dad’s generation and my own. Holding social status constant things have clearly declined.


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