Unemployment a good thing? For economists?

A thought-provoking piece from Mark Thoma, in which he argues that many jobs that have gone deserved to go; it's the creation of new ones that should occupy our minds.

There is a pipe-smoker-in-a-leather-chair comfortableness about this (I'm not sure what the unemployment rate is for economists; should the 10 - 15,000 who failed to predict the credit crunch all be sacked?), but he may be right.

However, the allegedly self-righting mechanisms of the market may not operate quite so efficiently in a single nation's economy when there are other major causes of disequilibrium at work in the world, including quarrelsome international politics and sharp disparities in global wage rates.

An image: picture a man in his study, happily using a tiny screwdriver to adjust the mechanism in a carriage clock, while a block of frozen waste hurtles silently towards him from a passing jet liner.

PS:

Coincidentally: "... if you fail to heed the roar in your ears and fail to look up what will inevitably come, while it may surprise you, does not surprise anyone who has passed sixth grade math." - Denninger

Welcoming the disaster

Two (among others) good links from Credit Writedowns:

"On April 17, 2007, famed short-seller Jim Chanos and other hedge fund managers met under tight security at the World Bank in Washington for the G-8 meeting. Chanos and Paul Singer briefed prominent policy officials about the growing financial instability. They gave irrefutable evidence that a catastrophe was building. They told officials that banks that were about to sink the global economy. They called for decisive action.

And they were ignored.

Gordon Brown was there..."

- New Deal 2.0

My comment: there's always a nice conspiratorial frisson when you think you can show They Knew All Along. Except there will have been other voices (like the 10 - 15,000 American economists who didn't foresee the credit crunch). And self-delusion. I don't think this nails the guilty parties.

Expect a major house-cleaning, a second American Revolution. We predicted the "Great Depression 2" around 2012. Well, we doubt taxpayers will passively sit one more time, like in the 1930s, in 2000, and the past few years. Next time voters will take a page from the history books about past revolutions in the American Colonies, France and Russia. A perfect storm will erupt in a massive global credit meltdown, bringing down Wall Street and the clandestine $670 trillion shadow central banking system.

- Paul Farrell

My comment: The appeal of revolution is to juvenile minds drunk on testosterone and misled by ignorant optimism. This is why the Communists have focussed on the young. I am reminded of how Rupert Brooke welcomed the onset of WWI:

Now, God be thanked Who has matched us with His hour,
And caught our youth, and wakened us from sleeping,
With hand made sure, clear eye, and sharpened power,
To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary,
Leave the sick hearts that honour could not move,
And half-men, and their dirty songs and dreary,
And all the little emptiness of love!

I don't think he would have agreed with his younger self by the end of the Great War. After a disaster comes the greater disaster: Romanticism.

What do our politicians control?

Plenty has been said about the EU and how it rules us, withour ever having had our consent to do so. But equally, our daily lives are governed by giant firms, often foreign-based.

For example, (and I offer this merely as a tiny, representative instance) I now have to pay a Frenchman to talk to a Welshman.

On September 8, 1966, the first (and very beautiful) Severn Bridge opened. It was constructed with the inventive help of the Royal Engineers (my father included), who floated prefabricated sections of the roadway on pontoons down the river, to be hoisted into position by cranes atop the towers that would hold the suspension cables.

I stood on the Welsh side with my mother and brother, listening to the Queen's speech from across the water, and watched as the Royal car came through. (Only a West Indian family near us had had the forethought to buy some flags on sticks to wave as Her Majesty passed.) The toll for cars was the then-equivalent of 35 US cents.

30 years later, a second bridge was completed, crossing further down the estuary to Cardiff and West Wales. A new holding company was formed (Severn River Cossings plc), as a partnership between John Laing plc, a French firm, GTM-Entrepose, and others.

John Laing plc is based in London and controls assets worth £698 million (December 2008 accounts); but the revenue from both bridges went to GTM-Entrepose which was subsequently taken over by Vinci Concessions SA, a subsidiary of Vinci SA, which controls assets worth almost 52 billion Euros and is based in Rueil-Malmaison, France.

The toll for cars is now £5.40 (you pay to get into Wales; any fool who wishes to leave can do so for free), and as late as last month there were protests that this highwaymanning is hampering trade and transport. But what, exactly, can the private citizen, the commercial haulier, or even the professional politican do? Doubtless any attempt by HMG to intervene would be challenged in a European court.

I think our national politicans are little better than a species of fraudster, pretending that they can do something for us but (I suspect) privately agreeing among themselves that they are powerless. In which case, all they can do is take instructions from their wealthy patrons and (perhaps partly out of impotent spite) divide and bully the insignificant people, some of whom (at permitted intervals, to be determined by their masters) vote them into office.

And now, I want to wave my little flag.

Massive inequality

I've said more than once that the housing market is segmented geographically and by price bracket, so discussion of house price movements in aggregate is not very helpful.

The same can be said of the savings rate, and here Andrew Kaplan plays with figures to show that US income is so unequally distributed that the top 1% could theoretically account for all the savings in the US. It is getting dangerous, I feel - I sense (I hear) among many ordinary people an inchoate rage against the financial elite, as well as against the remote political class that services them.

This concentration of wealth and power is exactly what sparked the American revolt of the 1770s. But a colonial secessionary war is quite different from a civil war; making peace after the latter is much harder. "O Freunde, nicht diese Töne."

Marc Faber - total breakdown ahead

... in my view, the big crisis is ahead of us. It may come in 4 or 5 years' time, maybe only in 10 years' time, but the total breakdown of the system is ahead of us and it will devastate the global economy. (4:18 on)

You have to decide whom to believe. Including Steve Keen, it's said that only 12 professional economists worldwide foresaw the crunch, although there are 10 - 15,000 practising in the US alone. So the majority verdict is useless. To me, Faber has the ring of truth.

The good news, such as it is, is that we may have a few years to prepare.

As to perceived turning points, I looked at this last December:

Splat

A couple of days ago I said that US debt default would splat the US far worse than its trading partners; of course, I missed the point. The real danger is rejection of US debt and the US dollar by its foreign purchasers, and both Karl Denninger and Jesse see that as an outcome of the Japanese election result.

Top travel tips from Lifehacker

Many useful suggestions on travelling and working here (htp: Credit Writedowns).