the strong usd

[thriftyandboringinohio]

Re: the strong usd

..Dictators are dangerous not just to foreign adversaries but even more dangerous to the citizens of the country....

Such is the lot of a simple soldier.
If you follow the wrong captain into the battle, your bad choice can cost you your life.

[touchring]

Re: the strong usd

Such is the lot of a simple soldier.
If you follow the wrong captain into the battle, your bad choice can cost you your life.

People go crazy after having too much power for too long - a figure that varies individually, some can retain sanity for a longer time, but almost everyone goes crazy after more than 15 years at the top. This maybe why elected heads of states are limited to 2 terms maximum?

[dcarrigg]

Re: the strong usd

I recently met with and had a very brief conversation with a very senior Chinese banker. He was a member of a panel to whom I had the opportunity to ask a question. Every other European banker mumbled their answer; whereas, he answered in a distinctly open manner and I came away with the firm impression that he was telling the truth. Soon afterwards, we exchanged business cards and I got a firm handshake.

My impression from recent contact with both sides of the equation is that business, (while always acting in the long term interests of the CCP and totally accepting their rule), are left to their own devices and are doing their best to improve the Chinese economy. Indeed, my meeting with him has left me deep in thought as to whether I should abandon any thought of a Western model for my future and instead, fully embrace China as my future partner. Looking back in history, indeed, many decades ago; the same thoughts must have crossed the minds of those originally attracted to emigrate to the USA. Migration is always driven by a refusal to accept new thinking by one's home nation; where greater potential lies in another nation. If China becomes careful to attract those of us who have lost faith in Western economic thinking; they may well become the new horizon; replacing the US as the target for new progress.

Yes, there are many detractions too; but that could have been said by the original settlers in Virginia. Yes, indeed, the word is RISK.

It's a strange thing, especially in the neoliberal-era west, but everyone tells you that they're acting selfishly for the common weal, and even when the result is economic stagnation, they double-down and tell you what we need now is more selfishness because the unprecedented amount last year didn't quite do the trick. In some cases, I think it may work out fine, if enough value is created. But not if it's being created by extracting rents and making the person the next rung down the economic ladder poorer. We seem to have lost that distinction. Instead we favor policies that promote winner take all. And not just among individual wealth or incomes. The phenomenon is ubiquitous. It happens amongst firms. It happens amongst athletes. It happens amongst students. It happens amongst homes. A slightly better water view is worth 500% the value than a slightly worse water view. Everything's geared to winner take all. Maximum extremes. Everyone else has to lose, even if the best AAA pitcher is statistically indistinguishable from the worst MLB pitcher, one is in deep poverty making $13k per year and has no access to healthcare, the other makes $600k+ with a fat benefits package. College admissions are like this. Huge premium for a "top 15" or so school, not much for the next 10, and almost no premium at all for the 26th. The SAT score differential will be non-existent or a single question. The quality of students will be almost indistinguishable. But some will get the big brand name on their resume, others will not. A huge number of "markets" are like this now. And they didn't used to be. It was designed this way by people playing monopoly. It doesn't reward anything in particular but the better connected and maybe the very marginally, ever so slightly more talented person than someone almost in every way his/her equal. And in that kind of world, motivated people will put ever more effort into trying to get that razor's edge over other equally motivated people until they're exhausted and miserable. Then once they have the edge, they'll do everything they can to change the rules to maintain it for them and their kids. And meanwhile almost nobody's playing Risk, because everyone's too busy playing Monopoly in this high-stakes, all-or-nothing, nonsense casino we've created called "Western Life."

[Chris Coles]

Re: the strong usd

It's a strange thing, especially in the neoliberal-era west, but everyone tells you that they're acting selfishly for the common weal, and even when the result is economic stagnation, they double-down and tell you what we need now is more selfishness because the unprecedented amount last year didn't quite do the trick. In some cases, I think it may work out fine, if enough value is created. But not if it's being created by extracting rents and making the person the next rung down the economic ladder poorer. We seem to have lost that distinction. Instead we favor policies that promote winner take all. And not just among individual wealth or incomes. The phenomenon is ubiquitous. It happens amongst firms. It happens amongst athletes. It happens amongst students. It happens amongst homes. A slightly better water view is worth 500% the value than a slightly worse water view. Everything's geared to winner take all. Maximum extremes. Everyone else has to lose, even if the best AAA pitcher is statistically indistinguishable from the worst MLB pitcher, one is in deep poverty making $13k per year and has no access to healthcare, the other makes $600k+ with a fat benefits package. College admissions are like this. Huge premium for a "top 15" or so school, not much for the next 10, and almost no premium at all for the 26th. The SAT score differential will be non-existent or a single question. The quality of students will be almost indistinguishable. But some will get the big brand name on their resume, others will not. A huge number of "markets" are like this now. And they didn't used to be. It was designed this way by people playing monopoly. It doesn't reward anything in particular but the better connected and maybe the very marginally, ever so slightly more talented person than someone almost in every way his/her equal. And in that kind of world, motivated people will put ever more effort into trying to get that razor's edge over other equally motivated people until they're exhausted and miserable. Then once they have the edge, they'll do everything they can to change the rules to maintain it for them and their kids. And meanwhile almost nobody's playing Risk, because everyone's too busy playing Monopoly in this high-stakes, all-or-nothing, nonsense casino we've created called "Western Life."

What you so eloquently describe is classic feudalism; but of a completely new kind, where everyone is driven to step onto the backs of anyone else surrounding them, as their road to success; no, seeming success. Today, no one nation occupies the high ground, least ways, not to my understanding. Brexit has deeply exposed the flaws inside Europe; where it has become so easy to blame their internal problems upon anyone but themselves. Here, the UK civil service has been shown to be totally corrupt, an excellent example being their recent announcement of the extension of the Crossrail contract; that they say they need to spend another £600M to check the software; when a blind man can see that all they are doing is keeping their show on the road and well oiled until HS2 comes on stream.... and that is just one of many examples.

China's problem is their clear intent to place an electronic Berlin Wall around every single citizen; which is as doomed to fail as it's original. Thus these risky choices are self evident and very thought provoking.

Am off to Paris tomorrow, so a brief change of scenery will help the thinking along.

[dcarrigg]

Re: the strong usd

What you so eloquently describe is classic feudalism; but of a completely new kind, where everyone is driven to step onto the backs of anyone else surrounding them, as their road to success; no, seeming success. Today, no one nation occupies the high ground, least ways, not to my understanding. Brexit has deeply exposed the flaws inside Europe; where it has become so easy to blame their internal problems upon anyone but themselves. Here, the UK civil service has been shown to be totally corrupt, an excellent example being their recent announcement of the extension of the Crossrail contract; that they say they need to spend another £600M to check the software; when a blind man can see that all they are doing is keeping their show on the road and well oiled until HS2 comes on stream.... and that is just one of many examples.

China's problem is their clear intent to place an electronic Berlin Wall around every single citizen; which is as doomed to fail as it's original. Thus these risky choices are self evident and very thought provoking.

Am off to Paris tomorrow, so a brief change of scenery will help the thinking along.

Enjoy the trip! I feel like I could use some time away myself. I love New England. I'll probably always come back even if I leave again. But it's good to get away now and again. I agree with you. Clears the mind. Especially if you get out of anglophone spaces. There are still a couple ideas left that, while heretical in English, can be stated matter of fact in other tongues.

[touchring]

Re: the strong usd

China's problem is their clear intent to place an electronic Berlin Wall around every single citizen; which is as doomed to fail as it's original. Thus these risky choices are self evident and very thought provoking.

A dictatorship always fears its own people more than anything else.

https://www.bloomberg.com/news/artic...ghurs-in-camps

[Chris Coles]

Re: the strong usd

A dictatorship always fears its own people more than anything else.

https://www.bloomberg.com/news/artic...ghurs-in-camps

While attending the IPPR Commission on Economic Justice https://www.ippr.org/cej final report a few days ago, I sat beside someone that said something very relevant to this debate. He said; "surely communism should be seen as just another religion?" That comment stemmed from my ongoing debate, with anyone who might listen, about the origins of the three letter word; God. Which I have, over the years, continued to set out in a paper I title: A Philosophical Viewpoint, Regarding the origins of the use of the human imagination, By those that wish to control humanity.

If that is correct, that communism is another form of religion; then the CCP has placed themselves into the most awkward situation, as they consider any religion to be a danger, and can be seen, regularly, to attack anyone espousing such a concept.

When I wrote earlier about the challenges presented by the idea of China becoming the place to go for forward thinkers; this debate especially comes to mind.

[vt]

Re: the strong usd

An important new book about how technology may be used for both improving living standards for humans significantly, but may also lead to greater control over thought.

https://www.amazon.com/gp/product/13...E2AF33CSVNRKGN

[dcarrigg]

Re: the strong usd

An important new book about how technology may be used for both improving living standards for humans significantly, but may also lead to greater control over thought.

https://www.amazon.com/gp/product/13...E2AF33CSVNRKGN

I'm still of the opinion this stuff is all overblown. I may begin to worry about AI 10 years after my health insurance company stops making me fill out paper forms. And I might begin to worry about robots about 10 years after they come out with one that does a good job shoveling my driveway at a reasonable price. Even if it gets better at stuff, it will take decades to roll it out, and it will be so expensive that it won't be rolled out everywhere. I wonder what the Amish think about AI having the power to control human thought...

[thriftyandboringinohio]

Re: the strong usd

The promised land - Fully Automated Luxury Communism

[Thailandnotes]

Re: the strong usd

A slightly better water view is worth 500% the value than a slightly worse water view. Everything's geared to winner take all. Maximum extremes.

It also happens with rocks. When I lived in Japan I got into bonzai to the point where I brought plants back to the sates. A rock the size of your fist might cost 6 dollars or 160 dollars and an amatuer would be stumped by which one should be which.

[dcarrigg]

Re: the strong usd

It also happens with rocks. When I lived in Japan I got into bonzai to the point where I brought plants back to the sates. A rock the size of your fist might cost 6 dollars or 160 dollars and an amatuer would be stumped by which one should be which.

The funny thing is how common it is everywhere now. I mean, anyone can think of any given 'collectable' fad that popped. In the US, big ones were Beanie Babies and Baseball Cards. For a while in the 90s, a one pound stuffed animal could sell for tens of thousands, or a baseball card with a hologram could go for thousands. Now they're basically trash. A whole set of them weighing 100 pounds might be worth $20 if it's in excellent condition. These are bubbles. It's not really demand that drove the prices. At least, not from people who get any utility out of it. It was speculators. Kids who love stuffed animals and baseball weren't driving the prices up. Adults who loved money were. There was never that much demand for the underlying thing itself--intrinsic value was never worth what the speculative value was--but people had the capital to burn and were willing to burn it in the hopes their casino-bet would pay out. And just like chips from a bankrupt casino, when the game was over, the underlying things people were bidding up were obviously nearly totally worthless. They had been owned by people who didn't care about them, produced for people who didn't want them, and sold by people who didn't care if they ever looked at one again. This isn't "the law of supply and demand," it's rampant, wildcat speculation leading to bubble formation. Prices don't reflect anything other than animal spirits. They are not set at any point that would efficiently distribute goods to maximize utility. Winner-take-all markets are not efficient.

I mean, if you start from the premise that maybe "The Market" and "The Economy" don't exist (which is a modern day heretical statement not far off from questioning the existence of God in the middle ages) then it's possible "Supply and Demand" aren't the Laws of His Holy Spirit and price levels are not reflective of a just world in which "The Market" has spoken and revealed His True and Holy Knowledge to us through prices. Prices are, after all, the one bit of evidence "The Market" supposedly leaves us through which to infer His Will. And His Will Be Done. On Earth, as in the Heavens.

So, if price levels can be set not only through the Divine Providence of The Market, but also totally inefficiently by irrationally greedy people trying to make a quick buck, then the question becomes, "How do you tell which is which?" Or, more accurately, when are prices set to levels at or near those levels which maximize utility, and when are they set at outrageous levels driven by speculation that are inefficient and cause net losses in utility? Especially important to consider when thinking about this is diminishing marginal utility. The idea is simple. Give a homeless person a cheap old boat he can sleep in, it might change his life forever and add a ton of utility. Give Larry Ellison another hundred million dollar yacht, and he might not even notice, or worse, he might hate the aesthetics of it and it adds no utility. This is an overwrought and oversimplified example, but it's obvious, right? An extra few thousand dollars per year might mean health insurance or no health insurance for someone working at an Amazon warehouse. An extra few thousand dollars per year is an imperceptibly tiny intraday market shift to Jeff Bezos.

So here's the punchline: winner-take-all markets are pretty shitty at maximizing utility. Almost invariably they make everyone miserable. The winners who do take all don't actually get that much more out of it than they would if they took a little less than all and spread more around. And the losers, who comprise the majority, get squeezed so badly they're miserable too. And all the while, everyone's gambling on the next big thing trying to get out of the rat race man created, but which we attribute to the unquestionable Divine Providence of The Market.

Of course, if you start asking questions like, "Who set the prices? Who set the wages?" and things like that, lots of people will say "The Market." But if you ask instead, "What is the exact process by which this wage was determined, starting at the decision to hire in the first place," you'll find in the vast majority of cases, the wages are set by an administrative process and HR professionals in a corporate or state bureaucracy. Most jobs don't even have a salary negotiation phase. They get posted with a salary band already set. The grocery store puts a flyer up saying, "Deli help wanted, $11 per hour." That's that. It's not a market transaction in any sense of the word. But there's the idea that "The Big Market" somehow set that price. Of course, if you ask exactly how "The Market" did it, nobody can give you an answer. They'd say, "Well, nobody would take the job if he wasn't paying enough, and the lowest amount he could possibly pay to fill it is the perfect price." And you'd ask, "Well, how did the manager know that was the lowest amount if he just picked a round number and put it on a flyer?" Then all you get is "The Market's Will Be Done." But I think if you see through it, you realize this isn't a market price-setting situation.

Economists are starting to somehow discover this (what everyone who had a high school job already knew) just now. Of course, they're going to phrase it in terms of Monopsony. But that word implies that The Market is out there doing His Divine Providence, but somehow Man is screwing it up or misinterpreting it. If you assume that maybe The Market is not real, this is just the way it is. It's the way most things are. Man determines price levels and wages. We set them ourselves. The Market has nothing to do with it. The person who first writes the price on a tag or the wage on a flyer sets the price. That's it. There's not another step. Maybe the position doesn't fill or the item doesn't sell and the price gets adjusted. But always and everywhere the price is mostly arbitrary, wrought with groupthink, decided by managers, and probably inefficient. We just like to tell ourselves the lie that The Market did it for us and The Market is perfectly efficient, so therefore we're picking the best prices we possibly can because The Market loves us and would not lead us astray.

The whole idea lets us avoid the hard question of stepping back and asking if we set the damned prices right. And the truth is, when the same shitty house in Cleveland costs two or three percent of an identical house on an identical plot of land a couple hours' drive up the road, we're probably ******* the prices all up. Prices like that almost certainly have almost nothing to do with the supply and demand of shelter from real people who want to live in them and almost everything to do with wildcat speculation. It's beanie babies and baseball cards all over the place. But since most of the Very Serious People have unquestioned and pure faith in The Market, they think about things in terms of supply and demand only, and their solution is to abolish zoning and let developers build a lot more ultra-luxury condo high rises. They don't stop and ask themselves why 82% of all new housing in the US built after the recession were luxury units. They don't ask themselves why rental vacancies are over 20% nationally in units built in the last decade even if they're only 5% or 6% for units built before the recession. They are not interested in these questions. Whatever developers want to build must be the perfect type of housing to build, because The Market's Will Be Done. The solution, if one has True Faith in The Market, is simple. Get government out of the way. Let developers do whatever they want. And what developers want is not a 1200sqft single family home. What developers want is luxury condo towers. Much easier to launder dirty foreign money that way anyhow.

And there's the rub, right? These same Very Serious People are willing to entertain the idea that maybe a whole bunch of President Trump's real estate investments are really about money laundering rather than real estate. But if that were true, do you think he'd be the only one? And what does that say about your supply & demand Perfect Market theory of real estate, if all sorts of major real estate deals in major cities and with major properties are really fronts for global money laundering rather than The Market creating supply to care for the demand He sees? You'd think these sorts of stories being reported together would create a little cognitive dissonance for the holy acolytes of Supply and Demand. After all, if skyscrapers are built for the primary purpose of laundering money, actual demand must be an afterthought, right? But of course it doesn't cause any cognitive dissonance. When have facts shaken any true believer's faith in anything?

The same thing goes all over the place. The MLB player's union could simply include minor leaguers too, and could use that bargaining power to help them out. After all, most players were there at one point or another. But they don't. The owners could simply not be so stingy and greedy and probably get healthier players playing better ball if they gave them health insurance and maybe $25-$30k per year instead of half that. But they don't. I'm pretty convinced optimum compensation for a near-pro player is not $13k with no benefits. But you can get people hoping to beat the odds willing to suffer for some number of years by dangling the lotto pot of an MLB career in front of them. Now, if those wages were set not by rational actors finding equilibrium through the Divine Influence of Supply and Demand, but rather by men in a power relationship who make arbitrary and greedy decisions regardless of what's best or most efficient, and players are accepting terrible inhumane treatment for the slight chance of something better and the love of the game, and players who make it stop caring about the plight of those who don't or haven't yet once they get their payoff, then there's a very concrete and human and down-to-earth explanation for what's happening. You don't need the economics voodoo.

I know people will think I'm utterly crazy for this. Because questioning The Market is questioning the central faith of the society we're living in. But don't you think it's just a little bit odd to start from the premise that The Market indeed does exist and is perfect, and work backward from there to try to figure out why bad things happen? This is literally what most (not all) economists do. It's how they teach it to kids. Econ 101 teaches you the perfect equilibrium graph in a vacuum and why it's perfect. No other social science does this. And, of course, it's not actually perfect. It's almost never even close when you measure things in the real world. You can even get economists to agree on that. Modest minimum wage increases have no effect on unemployment. Supply and Demand graph says that's impossible. But thousands of observations say otherwise. In physics, they'd throw the theory out. In economics, the theory never changes and always remains regardless of observations in reality. So they are just left to impotently wonder why.

They never question The Market. That's heresy. So when their observations don't match up, we get a lot of head scratching and confusion. The same way they're all confused why record productivity coupled with near-record unemployment is not leading to real wage gains. The reason why is obvious, if you don't begin with the premise that The Market is real. Then you don't expect things to be perfect or efficient. And soon you realize it's really power dynamics. It's a political struggle. Here's an easy example: Uber sets the price of a ride, decides when surges happen, etc. Them's the (arbitrary) rules. But drivers have no right to coordinate to negotiate what those prices should be. Uber drops rates, they lose money. They get no say at all. Well, if we're playing winner-take-all, it's obvious who the winner is with rules like that. Unemployment could be at 0 and productivity could increase tenfold and real wages would not budge. The system doesn't work the way they think it does. It's also why they cannot see bubbles coming. Because deep down, they don't believe in bubbles. An economist believing in bubbles is like a priest believing God has pimples. Imperfections cannot exist on The Perfect. Even now, there are a fair number who insist the housing and dot com bubbles did not exist--that everything was priced perfectly for its time. Those are the ones that really gargled the Kool-Aid. But they're out there.

Anyways, I've gone on long enough. But maybe it's worth thinking about the idea that The Market has become God to most policymakers in the West. But not to the Chinese leadership. That's why the RMB will be worth whatever they want it to be worth. That's why they can get 10%+ y/y growth for 20 years straight without a recession. They can and will pick the wrong prices too. But they won't do so believing it's Divine Providence that sets them. Not blinded by faith (at least not that particular one), they have a different view of what prices should be, how prices should be set, and who has the power to do it. And it's worth noting that this faith in The Market as God is extremely new. The founders of the US, for example, did not have this faith. In the US Constitution, they gave Congress the power: "To coin Money, regulate the Value thereof, and of foreign Coin..." Note that "markets" don't enter into the Constitution. The idea that Congress would cede the authority to set prices or the value of the dollar to "The Market" simply didn't exist then, and probably would have been thought of as absurd. But here we are. Doing it. We've let God take the wheel. Now all that's left to do is hope we don't crash into a ditch.

[touchring]

Re: the strong usd

Anyways, I've gone on long enough. But maybe it's worth thinking about the idea that The Market has become God to most policymakers in the West. But not to the Chinese leadership. That's why the RMB will be worth whatever they want it to be worth. That's why they can get 10%+ y/y growth for 20 years straight without a recession.

If a recession does come which I'm sure it will come, China's demographics, which is terrible to begin with, will crash because even in good times no one can afford to have kids. There's a reason why the rich are buying apartments in Vancouver, everyone knows what is coming.

Found an interesting article. While this maybe an unfortunate/extreme example in the poorer part of inland China, but the plight of the average late baby boomer Chinese family is not that different. People born after 1960 are affected by the single child policy.

https://www.nytimes.com/2018/08/20/b...harmacist.html

What we can learn from this is that the growth in China has already peaked and whatever growth is at the expense of having kids - worsening the already bad demographics problem.

[dcarrigg]

Re: the strong usd

Oh yeah, don't mistake me, I'm not saying China's system is a panacea. I'm just saying I think the worldview and outlook is different, and more congenial to increasing world power than most Westerners want to admit.

[Thailandnotes]

Re: the strong usd

The funny thing is how common it is everywhere now. I mean, anyone can think of any given 'collectable' fad that popped. In the US, big ones were Beanie Babies and Baseball Cards. For a while in the 90s, a one pound stuffed animal could sell for tens of thousands, or a baseball card with a hologram could go for thousands. Now they're basically trash. A whole set of them weighing 100 pounds might be worth $20 if it's in excellent condition. These are bubbles. It's not really demand that drove the prices. At least, not from people who get any utility out of it. It was speculators. Kids who love stuffed animals and baseball weren't driving the prices up. Adults who loved money were. There was never that much demand for the underlying thing itself--intrinsic value was never worth what the speculative value was--but people had the capital to burn and were willing to burn it in the hopes their casino-bet would pay out. And just like chips from a bankrupt casino, when the game was over, the underlying things people were bidding up were obviously nearly totally worthless. They had been owned by people who didn't care about them, produced for people who didn't want them, and sold by people who didn't care if they ever looked at one again. This isn't "the law of supply and demand," it's rampant, wildcat speculation leading to bubble formation. Prices don't reflect anything other than animal spirits. They are not set at any point that would efficiently distribute goods to maximize utility. Winner-take-all markets are not efficient.

Midway through your first paragraph above, I started thinking about tulips and burst out laughing.