I don’t know where I sit on the political spectrum, but I know I don’t fit into any particular party or ideology.  I’m not a socialist, nor a communist, and I suppose you could say I reluctantly advocate free markets, though I don’t think the invisible hand deserves much praise.

I feel that large amounts of money in few hands is a dangerous thing.  Power corrupts and absolute power corrupts absolutely.  My views toward the rich could be summed up with this quote,

‘To convert the business man into the profiteer is to strike a blow at capitalism … The business man is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.”

- John Maynard Keynes

As long as businesses create products and services that improve people’s lives, in fair competition, then I won’t complain about large profits or even a large degree of income inequality.  I’ll bear it.  As Mark Zuckerberg rakes in billions of dollars selling our private information to marketing firms and private corporations, I’ll turn away because I know of the millions of people, like my mom, who love Facebook, and it really does provide a service people love.

But there are those who worship the free market.  They lose all common sense and spew out total nonsense.   Many if not most hardcore libertarians are this way, and that’s why I can’t associate myself with them.  One of their central websites is the Ludwig von Mises Institute, and I occasionally read their articles.   Just a few days ago I came across the most ridiculous post entitled Defending Kim Kardashian.

I saw the title and immediately rolled my eyes.  I thought, “Are you kidding me?  Are you seriously going to defend the millions of dollars Kim Kardashian is making?”  I read on to find gems like these,

Unlike the majority of us who live relatively boring lives, Kim Kardashian has made a career out of selling the public an up-close-and-personal view of her private affairs. This recently included a rumored farce of a wedding to NBA superstar Kris Humphries, which fizzled after only three days but made the reality star millions.

…

Whether or not you agree with the type of life Kim Kardashian leads is ultimately a question of morality and ethics. However, her ability to attract fans and monetary compensation is something to admire. Unlike the government, Kardashian forces no one to purchase the products she endorses, view her television reality shows, attend her birthday party, or cover her exploits for various media publications. What she gives up in terms of a private life has brought her and her family a financially comfortable standard of living.

Oh yes, Kim Kardashian lives such a fascinating life.  *rolls eyes* We all know reality television is poison for the mind.  American culture has went down the toilet, and it’s really an indictment against our society that anyone is interested in Kim Kardashian at all.  I’ll admit she earned her money in the free market, and nobody was forced to participate in her wedding, or watch her television show, but that doesn’t mean she isn’t a parasite to society.

Of all the people in this world, you think she’s the one who deserves millions of dollars in the bank, which she earned through a sham wedding, to a man she obviously didn’t love?  Just a few weeks after the fact, both her and her ex-husband were bad mouthing one another.  ”You’re only famous because you made that sex tape!”  ”Oh yeah!  You’re just an inconsiderate bastard!”

She’s the one who deserves to have the best of everything life has to offer?  Are you seriously trying to defend this woman, in the midst of our economic crisis?   This is what I mean.  The free market is their religion, and it blinds them to common sense.

After babbling on about capital, the free market, and the importance of saving, the article proceeds with,

The act of savings both forestalls present consumption and, when placed into a bank or financial institution, adds to the amount of funds available to be lent to aspiring entrepreneurs. With more funds available, longer-term and better methods of production can be sought to increase the supply of consumer goods. In an economy not subject to continual monetary debasement and inflation via a central bank, prices are allowed to fall, thus raising real income for consumers.

Reality stars such as Kim Kardashian aid in this process as their revenue-generating ability allows them to set aside more of their income. This accumulation of savings leaves more money to be invested in base capital, which increases the productive capacity of the economy. This isn’t supply-side economics; it’s a simple acknowledgement of the scarcity that dominates our world.

This libertarian author is trying to convince us that it’s ok that Kim earned all this money, even through she contributes zero benefit to society.  She’s going to deposit her millions in the bank, and they’re going to lend those funds out to entrepreneurs who are going to do wonderful things for all of us.  So don’t worry.  It’s all going to be ok.

That’s ridiculous.  But do I want to live a society where all of our decisions are regulated and controlled by government bureaucrats?  No.  If you want to support such a worthless woman with your time and money, then I suppose I can’t stop you.  But please, stop defending her.  I can understand that you don’t want the government to tax her, and feel that bureaucrats would just spend it all on wars and payoffs to their buddies.  I get it.   Just don’t worship the invisible hand.  You look like an idiot.

As I’ve been writing my Space, Time, and the Mind posts, I’ve been thinking a lot about technology and artificial intelligence (AI).  Eventually I want to write about AI since it is our attempt to emulate the actions of the human mind, building intelligent machines which can do various tasks for us.  That got me thinking about the economy in the future.

If you’ve studied economics, you’re probably familiar with a concept called “jobless growth”.  It is a phenomenon where the economy grows but there are no new jobs being created for workers.  Ultimately I think technology and automation brought about by intelligent machines will eventually make the human worker obsolete.  In the beginning, relatively unskilled labor will be replaced by robots, but later all of us will be unnecessary.  When I went to Steak and Shake the other day, I saw a young woman in the back making burgers and thought, “Twenty to thirty years from now, I can easily imagine a robot doing that job.”  The same applies to waitress positions.  With time, truck drivers and warehouse workers will be replaced.  Super market cashiers, shelf stockers, and janitors could all be replaced.  All these unskilled positions will likely be replaced and automated by intelligent robots.  That brings up another question.  How in the future will these displaced workers find jobs and earn their living?

It’s a bit sad to think of a future that doesn’t need us, a future where we’re little more than the robots’ domesticated playthings.  I’d like to quote a passage from a rather surprising source.

But suppose now that industrial society does survive the next several decade and that the bugs do eventually get worked out of the system, so that it functions smoothly. What kind of system will it be? We will consider several possibilities.

First let us postulate that the computer scientists succeed in developing intelligent machines that can do all things better that human beings can do them. In that case presumably all work will be done by vast, highly organized systems of machines and no human effort will be necessary. Either of two cases might occur. The machines might be permitted to make all of their own decisions without human oversight, or else human control over the machines might be retained.

If the machines are permitted to make all their own decisions, we can’t make any conjectures as to the results, because it is impossible to guess how such machines might behave. We only point out that the fate of the human race would be at the mercy of the machines. It might be argued that the human race would never be foolish enough to hand over all the power to the machines. But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines decisions. As society and the problems that face it become more and more complex and machines become more and more intelligent, people will let machines make more of their decision for them, simply because machine-made decisions will bring better result than man-made ones. Eventually a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won’t be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.

On the other hand it is possible that human control over the machines may be retained. In that case the average man may have control over certain private machines of his own, such as his car or his personal computer, but control over large systems of machines will be in the hands of a tiny elite — just as it is today, but with two difference. Due to improved techniques the elite will have greater control over the masses; and because human work will no longer be necessary the masses will be superfluous, a useless burden on the system. If the elite is ruthless the may simply decide to exterminate the mass of humanity. If they are humane they may use propaganda or other psychological or biological techniques to reduce the birth rate until the mass of humanity becomes extinct, leaving the world to the elite. Or, if the elite consist of soft-hearted liberals, they may decide to play the role of good shepherds to the rest of the human race. They will see to it that everyone’s physical needs are satisfied, that all children are raised under psychologically hygienic conditions, that everyone has a wholesome hobby to keep him busy, and that anyone who may become dissatisfied undergoes “treatment” to cure his “problem.” Of course, life will be so purposeless that people will have to be biologically or psychologically engineered either to remove their need for the power process or to make them “sublimate” their drive for power into some harmless hobby. These engineered human beings may be happy in such a society, but they most certainly will not be free. They will have been reduced to the status of domestic animals.

Who do you think wrote that?  A prominent philosopher?  A futurist?  An economist?  No, not quite.  It was written by the Unabomber, Ted Kaczynski.  I’m certainly no apologist for his cause, and find his idea of bombing innocent people to bring attention to his ideas appalling.  Even so, he makes some powerful arguments.  He felt that our technology was going to, at worst, lead to the extermination of our species, and at best, create a miserable world without purpose or meaning.

I already see unskilled labor being displaced.  Most people think that we need to create education programs and help such workers get into more highly skilled positions.  After all, we all need to carry our weight.  Our workforce needs to step up and compete.  Or do we?  One thing to consider is this:  our technology is supposed to make life easier for us, not harder.  You’d think if we automated a job with robots we could relax and let them handle the work while we reap the rewards.  Instead, our intelligent machines will leave us working harder and, even worse, unemployed.  We’ll have to work our butts off studying at universities, having to master more and more difficult material in order to be able to contribute to the economy and land a decent paying job.  Also, not everyone has an analytical type of mind, capable of doing difficult mental work.  Considering this, it seems inevitable that once technology reaches this point (and it’s not all that far away), unskilled people need to be given a comfortable minimum amount of wages even if they’re not currently employed.

What!  Are you crazy Jason?  That’s the ultimate welfare state!  Yes, it is.  But we’re entering a new age that’s unlike anything humanity has ever experienced.  When robots are doing all the grunt work, performing all the menial tasks to support our everyday existence, humans should relax, and not be forced to compete with the technology designed to help them.  Scientists and other highly skilled positions should continue their jobs, and help improve the machines until they too are displaced.  During the transition, however, once a robot takes your job you should be able to just sit back and enjoy yourself.  Let the robots serve you in the restaurants, go see a movie, visit the lake and go fishing, learn a hobby, read some books, compose music, and just do whatever you want to do.  If you want to work for fun, that’s fine, but you shouldn’t have to.

I know this is troubling, but we really will be worthless at this point.  It will be harder for the average person to find any meaning to their existence.  Nobody will need you outside of emotional bonds, such as love.  But even that will likely be replaced.  People will find their lovers in virtual reality, and probably fall in love with AI beings who are better lovers than you could ever be.  People may well fall in love with realistic robots.  The upcoming world is crazy.  It’s really hard to put your head around it.  And you want to know what’s worse?  This is pretty much inevitable.  It’s not like people are going to stop improving technology.

I don’t know what to think of a world where robots can outperform us in every way.  We pick up a guitar and play in a restaurant.  Then a robot plays the next song and makes you look terrible, even if you’re the best human guitar master alive.  And if we merge with the machines, we lose our individuality and uniqueness.  In many ways, we become one.  We can share abilities, memories, experiences, and everything else, just as easily a networked computers can share files.  Who and what are we?  What does all this mean?  On the plus side, we can understand one another better than ever before, but that’s not to say there’s no downsides.

How will we manage and distribute our resources?  There’s several ways to look at that problem, but I’ll share my own view on the matter.  The main factors you need to keep in mind is nanotechnology and virtual reality.  Currently scientists are building what are called nanofactories.  These machines have billions of micro-machines, conveyor belts, and lifts.  They take raw materials and produce anything you desire, molecule by molecule.  Watch for yourself.

Our future economy will be geared around sharing what you create.  As for physical products, you’ll share information and blueprints.  I imagine that everyone will have nanofactory appliances in their homes, and if we see a product we like, we’ll simply download the blueprints off the internet and have a nanofactory assemble one for us.  When we’re finished with something, similar technology will dismantle it back into the raw materials.  If every type of food and product can be produced by such methods, why should people have to work jobs?  There’s no need.  People should focus on being creative and sharing what they create.  Most economic theories revolve around scarcity.  Even in this system there is scarcity, but it’s limited to the raw materials and energy to use in the production.  These changes are going to require us to rethink the economy.

Once people have nanofactory appliances, will people even need to work or earn money?   The only time you’d need money is when nanofactories cannot produce what you’re wanting.  Overall though, most all labor will be truly voluntary.  I can’t imagine people easily being forced to do things.  They won’t have to worry about bills or grocery money.  They’ll be able to produce any food they need by pressing a button on their nanofactory appliances.  We can make it a mandated law that every household have access to nanofactory appliances and a certain liberal amount of raw materials and energy.  Projects which use a lot of raw materials, energy, and public land can be voted upon.  As for who gets the most land to build on, that will probably go to whoever is the most creative.  If you produce music people like, or design some helpful invention, or something else creative, then people can “like” your blueprint, and you get rewarded with land, and maybe computational power.  I don’t know.  There will certainly be a shift in what’s considered valuable.

This is where I worry.  Once the masses are useless, as Kaczynski points out, the elite may well just have them exterminated so that they can have the entire world for themselves.  Sadly, I see this as a very strong possibility.  If we don’t blow ourselves up with nuclear weapons, bioengineer a plague which kills us all, or pollute our planet to an extent to which its uninhabitable, we may well survive only to be slaughtered by the greed of powerful elites.

You know, sometimes I wish I wasn’t a thinking person.  I saw a young man the other day with his girlfriend.  They were holding hands, smiling, laughing, and I seriously doubt any of these things were of any concern to them.  I chose to pursue the truth about this world and learn what makes it tick.  I find myself baffled by quantum mechanics, troubled by the forces running our economy, and blown away by what the future may hold for humanity — everything from pure bliss where humans are practically gods, to mass extermination, even dystopian scenarios of pure misery and slavery ruled by transhuman overlords.  Sadly, this deep knowledge I now possess makes me sound like a crackpot to the average person, who has no idea what I’m talking about.  Honestly, my mind often feels so rattled that I don’t care anymore.

Bertrand Russell felt that the human race would annihilate itself if technology continued to progress yet humanity lacked an understanding as to the scientific principles which make it all work. I agree with him. I feel like we’re placing a powerful gun in the hands of a young child. Superstitions, hatred, greed, I really wonder if we’re capable of handling the powerful technology of the upcoming century. I don’t think we’re ready, but there’s no stopping it. We’ll see if we make it out alive.

In the meantime, as long as humanity trudges on and robots replace us in the workplace, I worry that many will continue to hold an antiquated mindset toward labor, and a lot of suffering will result.  It’s still commonly held that everyone should have to earn their way in the world.  I believe in hard work, but we work to reap the fruits of our labor, not to work in and of itself (unless you enjoy the work, which is a small minority of cases).  If robots can do it, let them do it.  If I live a normal lifespan by today’s standards, I expect to see this being a huge problem by the time I’m an older man.  I’m currently 28 years old, and in thirty years I’ll be around sixty.  By then, I expect robots to be powerful enough to very easily do unskilled labor as well as a human.  I don’t know how long before we’ll have nanofactories, but I wouldn’t be surprised to see them within my lifetime as well.  I’d be surprised to see robots doing creative work as well as human beings during my lifetime, but overall, that’s not far off either.  It’ll happen before the century ends.

Facebook is one of the most celebrated websites on the internet.  I don’t think it’s worth near the hype it’s received.  I wonder how many people realize that Facebook has nothing to do with staying connected with friends and family.  The reason the company is now worth nearly $65 billion dollars is they are a corporate data mining operation with one goal in mind — sell as much targeted advertising as possible.   I just finished reading an interesting article in Business Week.

As a 23-year-old math genius one year out of Harvard, Jeff Hammerbacher arrived at Facebook when the company was still in its infancy. This was in April 2006, and Mark Zuckerberg gave Hammerbacher—one of Facebook’s first 100 employees—the lofty title of research scientist and put him to work analyzing how people used the social networking service. Specifically, he was given the assignment of uncovering why Facebook took off at some universities and flopped at others. The company also wanted to track differences in behavior between high-school-age kids and older, drunker college students. “I was there to answer these high-level questions, and they really didn’t have any tools to do that yet,” he says.

Over the next two years, Hammerbacher assembled a team to build a new class of analytical technology. His crew gathered huge volumes of data, pored over it, and learned much about people’s relationships, tendencies, and desires. Facebook has since turned these insights into precision advertising, the foundation of its business. It offers companies access to a captive pool of people who have effectively volunteered to have their actions monitored like so many lab rats. The hope—as signified by Facebook’s value, now at $65 billion according to research firm Nyppex—is that more data translate into better ads and higher sales.

After a couple years at Facebook, Hammerbacher grew restless. He figured that much of the groundbreaking computer science had been done. Something else gnawed at him. Hammerbacher looked around Silicon Valley at companies like his own, Google (GOOG), and Twitter, and saw his peers wasting their talents. “The best minds of my generation are thinking about how to make people click ads,” he says. “That sucks.”

Your friends and family aren’t the only people viewing what you do on Facebook.  There’s an army of analysts watching everything you do.  They want to know who you’re dating, how long you’ve been together, when you break up, where you’re working, your hobbies, your interests, what TV shows you enjoy, movies you’re watching, your education level, your thoughts on political positions, and the list goes on.  These analysts crunch away and sell off all of your information to corporations wanting to sell their products.

It’s sad to me that our most brilliant mathematicians are not working on inventions and technology which changes the world — instead they focus on helping Wall Street fat cats by devising trading algorithms, and work on complex software systems for targeted corporate advertising.

Hammerbacher grew up in Indiana and Michigan, the son of a General Motors (GM) assembly-line worker. As a teenager, he perfected his curve ball to the point that college scouts from the University of Michigan and Harvard fought for his services. “I was either going to be a baseball player, a poet, or a mathematician,” he says. Hammerbacher went with math and Harvard. Unlike one of his more prominent Harvard acquaintances—Facebook co-founder Mark Zuckerberg—Hammerbacher graduated. He took a job at Bear Stearns.

On Wall Street, the math geeks are known as quants. They’re the ones who create sophisticated trading algorithms that can ingest vast amounts of market data and then form buy and sell decisions in milliseconds. Hammerbacher was a quant. After about 10 months, he got back in touch with Zuckerberg, who offered him the Facebook job in California. That’s when Hammerbacher redirected his quant proclivities toward consumer technology. He became, as it were, a Want.

At social networking companies, Wants may sit among the computer scientists and engineers, but theirs is the central mission: to poke around in data, hunt for trends, and figure out formulas that will put the right ad in front of the right person. Wants gauge the personality types of customers, measure their desire for certain products, and discern what will motivate people to act on ads. “The most coveted employee in Silicon Valley today is not a software engineer. It is a mathematician,” says Kelman, the Redfin CEO. “The mathematicians are trying to tickle your fancy long enough to see one more ad.”

I can’t stand quants.  I think they’re worthless human beings.  The idea of investment is providing capital to entrepreneurs who will bring new products and services to the world, making the world a better place.  In effect, these money masters are in charge of our society’s resources,  controlling which technology gets created.  They hold humanity’s destiny in the palm of their hands.  And what do they do with this power?  They create a casino where everyone tries to outwit one another by devising clever mathematical algorithms to make systematic trades.  They create the mortgage security market and then bet on who will and will not default on their mortgages.  They inflate a bubble, make huge profits on the upswing, then cash in on the downswing in the derivatives market.   It’s so absurd that I want to scream.

Call me old fashioned and conservative, but I believe banking and finance should be a boring job, because it is.  We don’t need financial cowboys gambling away our hard earned savings and retirements.  In order for markets to function properly, profits and rewards must be based on whether or not a person is adding value to and improving others lives.  When people can earn money without doing this, things fall apart.   This seems like a good place to quote Hayek.

“It is that any workable individualist order must be so framed not only that the relative remunerations the individual can expect from the different uses of his abilities and resources correspond to the relative utility of the result of his efforts to others but also that these remunerations correspond to the objective results of his efforts rather than to their subjective merits. An effectively competitive market satisfies both these conditions.”

- Friedrich Hayek – Individualism And Economic Order

Working at Facebook selling advertising is infinitely better than being a “quant”, but that’s not saying much.  There is some merit to effectively making people aware of products that are available, and helping a person find a good deal.  All in all though, it’s sad to see our brightest minds waste their lives and their talent.  Jeff, don’t waste your life working for Facebook.  Go out there and contribute to real technology that truly improves the human condition.  We already have enough junk in our homes.

You’ll find an excellent piece in Vanity Fair written by Nobel laureate economist Joseph Stiglitiz entitled Of the 1%, by the 1%, for the 1%.  I’d like to post several excerpts here today.

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

We’ve seen a steady decline in the quality of life in both the poor and the middle-class over the last twenty five years.  If you look at the current events unfolding, there’s no reason to expect change.  What’s most disappointing is the fact that the wealth the top 1% has been earning has little to do with performance – in fact, especially in the financial sector, it’s been the opposite.  We’ve had a financial system of bailouts, socialized losses yet privatized gains, and their CEOs receiving record bonuses for running the world into the ground.

Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.

First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

Years ago, after a detailed study in economics, I was tempted to go into the financial world.  I thought about becoming a fund manager of some sort, mainly for the reason Stiglitiz suggested — it’s very lucrative.  I never went through with it though, mainly because I thought it was sleazy.  I would read books on investing and the market and think to myself, “The financial world is corrupt and completely manipulated.  How do any of these activities have anything to do with goods being produced and improving the quality of people’s lives?  All of this is criminal!”  As I learned more, I l figured out that most of those activities have nothing to do with improving people’s lives; they’re just easy ways to earn huge sums of money in an economy where the odds are stacked you. For example, I would read books on how to get real-estate loans for a low interest rate, with no money down, slightly fixing up the properties and then renting them out for more than your minimum payment.  This allowed you to build up lots of free equity, both from the minimum payments, but mostly from the housing bubble which was forming.  During the housing boom, you could’ve made a fortune doing this (and many people did!).  All in all, the method is dependent on the Federal Reserve’s cheap credit policies (Greenspan years), in combination with Wall Street’s mortgage back securities market, which allowed huge sums of money to flow into the mortgage market from investors around the world.  If you can’t find a tenant to rent to, you simply sell the place for a profit.  Considering housing prices were rising so quickly, it wasn’t a problem to sell 20% below market price and still earn a profit.  Other high earning methods I considered included things like acquiring cheap properties via tax liens during the massive defaults in select areas of the country.  The list goes on and on.  It all made me sick to my stomach though.  I couldn’t go through with any of it and be able to look at myself in the mirror.  I felt like a vulture.

But why are intelligent young people considering doing these sorts of things?  Here’s a little of my own story.  Around 10~12 years ago I was earning really good money developing software for various companies.  Back then companies respected software developers and were willing to pay good money for good work.  With time however, websites such as rentacoder.com came online, making it easy for companies to find and hire poor foreigners who were willing to work for wages far lower than are reasonable.  For example, a tour company was interviewing various developers to see who they would hire out to do a project for them.  I vividly remember meeting with the president of the company in a local restaurant, and I was given the specifications for the job.  I looked it over and told him I would do it for $800, which really wasn’t that much money.  It probably would have required 15~20 hours of my time.  He then told me, “We’ve found a developer in India who will do the project for $25, yet you want $800!?”  Then he gave me a condescending look and left.  He treated me as if I was trying to rip him off.  I sat in the chair, sipping on my Coca-cola, thinking, “Well, I suppose I need to find a new occupation.  There’s no way I can compete with this.”   Even if that Indian developer was better than me and could do it in half the time (which I seriously doubt), he would have been willing to work for $2 an hour.   I could become a custodian and earn seven times that much!  Why would I want to do difficult computer programming jobs and barely earn anything?  I was still able to earn good money for quite a while, but it became harder and harder to find jobs.

Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.

Just the other day I talked about technologies such as OpenCV, which are making the construction and programming of robots easier than ever.  Factory jobs are going to become a thing of the past before too long.  Even cheap overseas labor will eventually become too expensive.  They’ll have robotic arms do all forms of assembly.  But for now, with trade agreements such as NAFTA, the corporations are outsourcing as much of their labor as possible overseas, allowing them to exploit third world labor markets to earn record profits.  How many of us have called Dell tech support only to get a foreigner who could barely speak English?  I’ve heard McDonalds wants to hire foreigners to remotely take their drive-through orders.  And as for all the workers in places like Mexico, their workers are toiling in un-airconditioned factories, given no benefits, and living in slums a few blocks away, barely earning enough money to survive.

And why do we keep hearing, “We’re broke, we’re broke”, yet find ourselves in a new war every other day?  First Afghanistan, then Iraq, then Pakistan, and now Libya.  Who’s next?

America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.

My generation has been hit hard by these things and our political efficacy is very low.  We don’t even believe in the system.  Only around 20% of those in my age group (in their twenties) even vote.  Celebrities may make television appearances trying to convince us how “cool” it is to vote, and how it’s our duty as responsible citizens to do so, but when we look at both parties, Democrats and Republicans, they both do the same thing — huge deficits, wars, erosion of civil liberties, and so on.  We see the rich getting richer, and all of us continually getting poorer, year after year – no matter which party is in charge.

Last semester I was told by my advisor to take a civics course, and so I did.  During class the professor lectured that one of America’s core beliefs is “equality of opportunity.”  I disagreed. I don’t see any evidence to support that claim and it doesn’t seem Stiglitiz does either.

…Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them….

Why is this the case?  What’s going on here?

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

I don’t expect things to get better.  The disparity between rich and poor will continue to grow and the middle class will continue to slowly wither away.  I’m sorry for being pessimistic here, but how else should I see it?  Joseph Stiglitiz isn’t the only Nobel laureate economist telling us this.   These are the sorts of things that depress me.  I am fulfilled when I do scientific research, and think about the universe, but then I look back at human society, the greed, the religious conflicts, the wars, the diseases, the poverty, the stupidity, the soon to be mass extinction of nearly half of all species on the planet, the pollution, the rapid overuse of non-renewable resources, the slow erosion of civil liberties, climate change, nuclear proliferation, and so on, I find myself staring at the wall completely depressed.  It doesn’t help when some of the greatest thinkers I admire, such at Steven Hawking, are telling me that there’s a good chance the human species will annihilate itself in stupidity absent a huge effort to colonize space.  If humanity kills itself off in stupidity, I swear, I’m going to find a way to resurrect myself, travel back in the past, and use my zombie corpse to slap all of our leaders across the face.

I just finished listening to a very interesting social psychology lecture. Fortunately, I am able to embed it so I will post it up for all of you here on my site as well.  The professor is Dr. Jonathan Haidt, a Professor of Social Psychology at the University of Virginia.

I very much enjoyed his discussion on the various taboos and “sacred” values held by modern liberals.  I have noticed three of these “taboos” myself but the other two were new to me.  The five sacred taboos Dr. Haidt mentions are 1) Race Differences, 2) Sex Differences, 3) Blaming The Victim, 4) Stereotype Accuracy, and 5) Nativism. Afterwards he gave an excellent example illustrating how they work.

Has social psychology become a Tribal Moral Community since the 1960s? Are we a community that is bound together by liberal values and then blind to any ideas or findings that threaten our sacred values? I believe the answer is yes, and I’ll make 3 points to support that claim.

1) We have taboos and danger zones.

First, we have taboos and danger zones. We social psychologists are normally so good at challenging each other’s causal theories. If someone describes a phenomenon and then proposes a causal explanation, the rest of us will automatically generate 5 alternative causal explanations, along with 5 control conditions needed to rule out those alternatives. Except when any of these issues are in play. These issues turn on the force field, constrain our thinking, and deprive us of our ability to think of the full range of alternative hypotheses. It’s too dangerous for me to work through examples. I’ll just refer you to Larry Summers’ famous musings about why men are overrepresented in math and science departments at the nation’s top universities.

As on one of his 3 hypotheses, he noted that there is a sex difference in the standard deviation of IQ scores between men and women. He didn’t say that men are smarter. He didn’t say that men have higher IQs. He just noted the well known fact that the variance of male scores is larger, which means that there are more men at the very bottom, and at the very top. Might that contribute to the underrepresentation of women at the very top levels of science? If you’re standing outside the force field it’s a good hypothesis, certainly worth exploring. But if you’re inside the force field, it is not a permissible hypothesis. It is sacrilege. It blames the victims, rather than the powerful. The ensuing outrage led ultimately to his resignation as president of Harvard. We psychologists should have been outraged by the outrage. We should have defended his right to think freely.

Source:  Edge.org

As for myself, I’m a member of the minority he speaks of throughout the lecture.  Though I’m not a social psychologist, I am socially liberal yet fiscally conservative.  Any of you who have read my posts on economics have probably gathered that already.  I don’t really fit well into any of the common political molds.

Take the recent financial crisis.  Most in academia hold a Keynesian perspective toward the economy.  I’ve read several Keynesian textbooks, most notably Paul Sameulson’s Economics textbook, and while I generally agree with their perspectives in microeconomics, when it comes to macroeconomics and the business cycle, I’ve never been convinced by their arguments, no matter how many of their books I read.  Also, considering they were unable to notice the housing bubble forming, and the greatest recession since the Great Depression caught them all by surprise, I think their theories are missing something very critical.  While I don’t agree with the Austrian school of thought completely, when it comes to their conception of money and the business cycle, I think they’re closer to the truth than those with a more Keynesian perspective.

Our society and economy have been built by complex bottom-up process, similar to biological evolution by natural selection.   It didn’t develop from a designed top-down process – it grew organically.  It’s messy and complicated, just as biological bodies are.  The economy is beyond simple aggregate supply/demand calculations, economic indicators are too vague to be of any real planning value, and I don’t believe anyone is smart enough to design out the direction of the economy.  I don’t always like how the free market distributes the resources, and I sympathize with their desire for distributive justice, but I seem to have a lot less faith in planning than most liberals do.  There’s too many factors which the planners couldn’t possibly think of and know about.   The Austrian school views the economy in this way and I think that’s what attracts me to it the most.

“Social theory begins with … the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design.”

- Nobel laureate economist Friedrich Hayek

Just recently I was reading some of Friedrich Hayek’s books, and underlying everything he writes you find the idea that societies and their economies are built by bottom-up processes.  They are not designed from the top-down and therefore many of our traditions, moral codes, and various ways of life can be difficult to understand at times.  The knowledge as to “why” they exist is spread throughout the individuals of the society, and no single person understands how it all ties together.  Many of us take part in events which include strange traditions which we don’t understand.  Many of society’s values and moral sentiments are similar in that they may not make sense to an individual person trying to think about them rationally.  They may have good reasons behind them yet no single person is conscious of them all, or they may have served a past purpose which isn’t of any use now.  Either way, the main point is that these traditions and moral values, regardless of how they may appear to us rationally, are the necessary by-product of the growth of a free society by bottom-up processes.  If you believe in freedom, you have to in some sense accept them, or a least tolerate them.  Many of the themes which I find in Hayek’s work sound very similar in theme to what I find in Richard Dawkins books, like Climbing Mount Improbable.  Take this quotation for example:

“The unwillingness to tolerate or respect any social forces which are not recognizable as the product of intelligent design, which is so important a cause of the present desire for comprehensive economic planning, is indeed only one aspect of a more general movement. We meet the same tendency in the field of morals and conventions, in the desire to substitute an artificial for the existing languages, and in the whole modern attitude toward processes which govern the growth of knowledge. The belief that only a synthetic system of morals, an artificial language, or even an artificial society can be justified in an age of science, as well as the increasing unwillingness to bow before any moral rules whose utility is not rationally demonstrated, or to conform with conventions whose rationale is not known, are all manifestations of the same basic view which wants all social activity to be recognizably part of a single coherent plan. They are the results of that same rationalistic “individualism” which wants to see in everything the product of conscious individual reason. They are certainly not, however, a result of true individualism and may even make the working of a free and truly individualistic system difficult or impossible.  Indeed, the great lesson which the individualist philosophy teaches us on this score is that, while it may not be difficult to destroy the spontaneous formations which are the indispensable bases of a free civilization, it may be beyond our power deliberately to reconstruct such a civilization once these foundations are destroyed.”

- Friedrich Hayek, Individualism: True and False

Compare the similarities to what Richard Dawkins says in his book Climbing Mount Improbable:

It is grindingly, creakingly, crashingly obvious that, if Darwinism were really a theory of chance, it couldn’t work. You don’t need to be a mathematician or physicist to calculate that an eye or a haemoglobin molecule would take from here to infinity to self-assemble by sheer higgledy-piggledy luck. Far from being a difficulty peculiar to Darwinism, the astronomic improbability of eyes and knees, enzymes and elbow joints and the other living wonders is precisely the problem that any theory of life must solve, and that Darwinism uniquely does solve. It solves it by breaking the improbability up into small, manageable parts, smearing out the luck needed, going round the back of Mount Improbable and crawling up the gentle slopes, inch by million-year inch. Only God would essay the mad task of leaping up the precipice in a single bound. And if we postulate him as our cosmic designer we are left in exactly the same position as when we started. Any Designer capable of constructing the dazzling array of living things would have to be intelligent and complicated beyond all imagining. And complicated is just another word for improbable — and therefore demanding of explanation. A theologian who ripostes that his god is sublimely simple has (not very) neatly evaded the issue, for a sufficiently simple god, whatever other virtues he might have, would be too simple to be capable of designing a universe (to say nothing of forgiving sins, answering prayers, blessing unions, transubstantiating wine, and the many other achievements variously expected of him). You cannot have it both ways. Either your god is capable of designing worlds and doing all the other godlike things, in which case he needs an explanation in his own right. Or he is not, in which case he cannot provide an explanation. God should be seen by Fred Hoyle as the ultimate Boeing 747.

- Richard Dawkins, Climbing Mount Improbable

I don’t think the building of our economy, society, and moral values is any different at all.  If any human being were asked to plan out an economy and society, with all of its accompanying laws, morals, and legal institutions, it’d be impossible.  To borrow Dawkins phrase, it would require a designer who is “intelligent and complicated beyond all imagining.  And complicated is just another word for improbable”.  That’s why I’m not a socialist and tend to lean toward the right on economic issues.

Another central theme of Hayek is that our system of money works because nobody has to understand the entire picture in order to take part in the economy.  That’s really an amazing thing when you think about it.  You can go to the store and spend the money you earn, and don’t have to worry about how the goods got there, how they were produced, and so on.  This has its downsides as well, such as if the clothing you’re buying was made in a Chinese sweatshop, and by buying it you’re supporting a rather nasty enterprise.  But anyways, I think there’s a big flaw in democracy because it doesn’t follow this principle.  As our society gets more and more complex, in order for us to vote correctly on issues, we need a deeper and deeper understanding of how it all ties together.  We drown in information and can’t decide on the correct plan of action.  I don’t know the solution to this, but what I do know is that every social system which we’ve successful built works because it does not require the individual to understand everything going on around them.  The viewpoint typically from the educated is for us all to be “well-rounded” and at least understand a little bit of everything.  It’s a nice sounding idea, but the more complex society becomes, the harder this sort of society is going to be to build.  We can keep blaming the stupid and uneducated for voting in the wrong politicians, and not understanding the issues, but I don’t feel it’s their fault.  As society gets ever more complicated, we’re all going to be falling into that category unless we somehow modify our brains so that it can process and store more information.  From an efficiency standpoint, having to have each person store practically all human knowledge in their head, we end up with a huge amount of redundant copies of information.   At that point, we have to ask what it even means to be an individual.  If in the future we have technology similar to the Matrix movies where knowledge, skills, and information can be “downloaded” into our brains, and we all know everything, and are skilled in just about everything, the individual is difficult to define.

NAFTA is a major contributor to our current economic problems.  It came into effect in January 1994, allowing our corporations to move themselves to foreign countries like Mexico and exploit cheap labor.  Millions of jobs have left the country. The corporations are paying the Mexican workers dirt and then reselling the products they produce back over here for record profits.  Considering the Bush tax breaks, it has helped contribute to our massive budget deficits, has led to a catastrophic loss of blue collar factory jobs, and contributed greatly to the general erosion of the middle class.  A lot of the money which was flowing to American middle class workers is now going into Wall Street shareholder’s pockets.

Did anyone see this coming?  Was it unpredictable?  Was this like the financial collapse of 2008, which caught most economists and intellectuals by surprise?  Not really.  Economists weren’t completely sure of the effects of NAFTA in their entirety, but they knew that it was going to hurt the working class and drive down their wages.  It’s important to note that 70% of our workforce depended on those factory jobs. I think what economists failed to anticipate was the full degree of damage NAFTA would do. It pains me to watch Noam Chomsky in this next video as he predicts, in vivid detail, everything that happened.  This interview is from December 1993, just before NAFTA came into effect.

Europe’s economy is collapsing.  There’s been too much spending and too much borrowing.  We’re next in line if we can’t get our budgets balanced.

The debt crisis in Europe escalated sharply Friday as investors dumped Spanish and Portuguese bonds in panicked selling, substantially heightening the prospect that one or both countries may need to join troubled Ireland and Greece in soliciting international bailouts.

The draining confidence in Western Europe’s weakest economies threatened to upend bond markets, destabilize the euro and drag out the global economic recovery if it is not quickly contained. It also underscored the mounting problems facing countries that during the past decade have both over-borrowed and overspent, and are now in danger of losing investor faith in their ability to make good on their massive piles of debt.

The perceived risk of debt defaults in Portugal and Spain drove their borrowing costs to near-record highs Friday, with the interest rate demanded on Portuguese bonds at a point where it could effectively cut the Lisbon government off from raising fresh cash to run the country.

Source:  Washington Post

*Sigh*.  I told you all about this long ago.  I’ve been writing this same thing, over and over and over, like a stuck record since 2006.  I get tired of writing posts saying the same thing.  Just to quote one of my more recent posts on the matter,

Our situation is eerily similar to Greece.  As Professor Ferguson points out, the looming crises will jump out of nowhere the second the costs to borrow more money increase due to fears of ballooning debts and deficits.  And that sort of thing happens in an instant.  That’ll set off a chain reaction and destroy this economy driven by borrowed funds.  This is exactly what Alan Greenspan is telling us as well.

Source:  http://www.jasonsummers.org/u-s-an-empire-in-decline/

Mark my words – this is the EXACT situation the United States is in.  The “Great Recession” is not over; it’s just beginning.  One day investors will start to panic about our debts as well, and our borrowing costs will shoot way up.  Then what are we going to do?  Print even MORE money?

These economic problems are hitting people hard.  There are record people needing food stamps nowadays.

A new time-lapse video illustrates the depressing rise of food stamp usage throughout the U.S.

The video’s creator, Zero Hedge’s John Lohman, points to the alarming levels — food stamps now feed a record 43 million — and warns that the program is the only thing keeping Americans from going “postal.” Sinatra’s upbeat tune “I’ve Got The World By A String” serves as an especially disturbing soundtrack.

According to a recent Wall Street Journal report, food stamp usage has increased almost 60 percent since 2007.

Source:  http://www.huffingtonpost.com/2010/11/21/food-stamp-map-video-us-_n_786478.html

And this must be because the corporations have no money to hire people, right?  No, you’re quite mistaken.  While your family is on food stamps, corporate profits are the highest ever recorded.

The nation’s workers may be struggling, but American companies just had their best quarter ever.

American businesses earned profits at an annual rate of $1.66 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or non-inflation-adjusted terms.

Corporate profits have been going gangbusters for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.

Source:  Yahoo finance

Oh, and by the way… I wonder how much longer you’ll have healthcare (assuming you do have health insurance)?  Let’s take a look at the cost trajectory given to us by the Congressional Budget Office.

If they can’t get that fixed, you won’t have health insurance for much longer.  You’ll get sick and well… die, I guess.  Somewhere around ~2019, a Fidelity Investments study predicts that very few corporations will be offering healthcare, retirement plans, and many other benefits we’ve become accustomed to.

I feel like I’m getting old because I think, “2019?  That’s a long ways off.  Wait, it’s almost 2011?  Didn’t I graduate in 2001?  Wow.  Time needs to slow down!”

Health care costs for employees have been rising for years, but perks and benefits such as cost-of-living increases, pension plans, bonuses, 401(k) contributions and tuition reimbursement are now being looked at as places to save millions of dollars. Given the massive savings for employers, many workers have doubts about when — or if — such items will ever fully or partially return.

On average, companies have sliced up to five employee-oriented spending areas, such as 401(k) matches and tuition reimbursement in the past year says Laura Sejen, global head of strategic rewards consulting at employment consultancy Watson Wyatt.

Job cuts and reduced raises have been commonplace for years, but the desperate economic times have chief executives cutting areas previously considered untouchable.

….

Employers spent nearly $8 trillion on total worker compensation in 2007, which is the latest full-year data from the Employee Benefit Research Institute, a public policy and education firm. Benefits such as retirement funding and health insurance made up 18.6% of that outlay. Wages and salaries represented the rest.

Health plan coverage alone typically costs employers $5,000 to $15,000 per worker each year, according to Fidelity Investments’ Consulting Services.

Funding retirement plans is also expensive. For every $1 million in total payroll expenses, a company could halt a match of 50% for every dollar up to 6% and save $30,000 a year if every employee were contributing the maximum.

Given the deep savings, slicing that retirement benefit and others can be hard to avoid for company leaders.

….

Almost half of U.S. employees surveyed by Fidelity predict that benefits such as health insurance, retirement savings plans and pension plans won’t be provided by their employer by 2019.

Most of that group say they’ll be responsible for getting their own benefits. A smaller percentage — 18% — says the government will provide for them.

Watson Wyatt says that 62% of employers are very confident they’ll offer health care benefits 10 years from now, down sharply from 73% last year. It’s the first time in the study’s 14-year history that employer confidence declined.

Health care costs are rising at about 6% to 7% a year, and “if you put that in the context of a difficult economy, most companies aren’t prepared to shoulder all of that burden,” says Tom Billet, a Watson Wyatt senior health benefits consultant.

He says that employees should get used to picking up more of the tab.

In general, the average 401(k) account shriveled 27% in 2008, falling to $50,200 from $69,200 in 2007, according to Fidelity. Without an employer match, workers feel extra savings pressure to shore up their sagging retirement accounts.

Dozens of companies have pulled back on retirement contributions, according to the Center for Retirement Research at Boston College. General Motors, Eastman Kodak and Sears Holdings are among them.

“Traditional pensions in the private sector are on their way out,” says Alicia Munnell, director of the retirement research center.

Yet, she expects 401(k) matches to come back. Many companies that suspended or reduced their matches after the recession of 2001 reinstated their contributions after the economy rebounded, she says.

Less formal perks, such as flexible time off, have taken a hit, as well.

….

Source:  http://www.usatoday.com/money/workplace/2009-04-06-employers-cut-worker-benefits_N.htm

These sorts of lies really annoy me, “Job cuts and reduced raises have been commonplace for years, but the desperate economic times have chief executives cutting areas previously considered untouchable.”  What bullshit.  They’re earning record profits.

Please join me in screaming as loud as you can from your back porch; that is, if you still have a home.

One out of every 34 Americans who earned wages in 2008 earned absolutely nothing — not one cent — in 2009.

The stunning figure was released earlier this month by the Social Security Administration, but apparently went unreported until it appeared today on Tax.com in a column by Pulitzer Prize-winning tax reporter David Cay Johnston.

It’s not just every 34th earner whose financial situation has been upended by the financial crisis. Average wages, median wages, and total wages have all declined — except at the very top, where they leaped dramatically, increasing five-fold.

Johnston writes that while the number of Americans earning more than $50 million fell from 131 in 2008 to 74 in 2009, those that remained at the top increased their income from an average of $91.2 million in 2008 to almost $519 million.

The wealth is astounding, says Johnston. “That’s nearly $10 million in weekly pay!… These 74 people made as much as the 19 million lowest-paid people in America, who constitute one in every eight workers.”

Source:  http://www.huffingtonpost.com/2010/10/25/income_inequality_statistics_tax_code__n_773392.html

And I’m in agreement with Johnston’s assessment as to the cause behind this.

It is the latest, and in this case quite dramatic, evidence that our economic policies in Washington are undermining the nation as a whole.We have created a tax system that changes continually as politicians manipulate it to extract campaign donations. We have enabled ”free trade” that is nothing of the sort, but rather tax-subsidized mechanisms that encourage American manufacturers to close their domestic factories, fire workers, and then use cheap labor in China for products they send right back to the United States. This has created enormous downward pressure on wages, and not just for factory workers.

Combined with government policies that have reduced the share of private-sector workers in unions by more than two-thirds — while our competitors in Canada, Europe, and Japan continue to have highly unionized workforces — the net effect has been disastrous for the vast majority of American workers. And of course, less money earned from labor translates into less money to finance the United States of America.

I also think the actions of the Federal Reserve are to blame here as well.  Greenspan inflated a nasty bubble when he lowered interest rates far below where they should’ve been.  All the cheap credit flowed into the housing sector and home prices doubled within a very short time period.  As my last post indicated, the “Rent Is Too Damn High”.  I honestly do want a campaign button.  People who are already struggling are having to pay twice as much rent as they should be.  Half of the prosperity during the Clinton years was a false prosperity induced by people borrowing against artificially inflated home equity and spending it in the economy.

You can see that during the Clinton years, Greenspan really pumped up this housing bubble.  Then ironically, to further stimulate an economy cheap credit had already badly damaged, the Fed during the Bush and Obama administration continued to lower interest rates in hopes to further “stimulate” the economy.  This leads to even more mal-investments and misallocation of capital resources.  Once interest rates hit the floor, what’s left to do?  They don’t want to increase taxes so they print money instead.

This business cycle induced by the Fed manipulating the interest rates is really a wonder to behold.

Step 1: It all begins when they lower interest rates, inflating asset bubbles and burying everyone in debts.

Step 2: Because the prices are artificially high due to cheap credit policies, once the credit faucets run dry, you run into a deflationary period as prices try to return to normal levels.

The economy begins to depend on cheap credit to survive but it’s an unsustainable course.  The Fed knows it can’t continue its low interest rate policies, but if it were to increase interest rates it would bring on deflation.  As Friedrich Hayek and Ludwig von Mises point out, however, there’s nothing that can be done to fix this.  A price correction is inevitable.  Homes and other asset bubbles are going to deflate back to true market levels.

Step 3: The politicians wet themselves when they think of deflation in a debt-driven economy, and nobody knows what to do.  They try to prolong the inevitable by slowly lowering interest rates, lower and lower.  This begins the “how low can you go” game.  More and more economic resources are misallocated and the economy never recovers.

step 4:  Interest rates hit 0 percent and the economy still isn’t being “stimulated”.  They fear lowering taxes.  In desperation, they oftentimes turn to printing money in stimulus programs.

The end result?  Slow economic erosion.

And all of this happens because of the central bank screwing with interest rates.  I hate central banks.  And low interest rates aren’t the only way they can screw things up.

As you can tell from the chart, if interest rates are hiked up too high, you also get economic problems.  Businesses can’t adapt quickly enough to policies like this.  They don’t know what to expect.  Should they expand their operations, or will credit rates ramp up out of nowhere?  How can they properly perform economic calculation?

One pattern you see from the chart is that when they lower interest rates, then quickly ramp them back up, you get recessions.   When Bernanke increased interest rates in 2004, this caused all kinds of economic problems — especially to all those who had taken out adjustable rate mortgages.  Their payments shot up out of nowhere.  This is an example of misallocation of resources.  People are in homes who shouldn’t be in homes.  They can’t afford them.

Government programs, such as the Community Reinvestment Act (CRA), led to considerable subprime lending (near 6% of subprime loans).  In 2002, we had the American Dream Down Payment Act, subsidizing down payments for low income buyers.  A lot of Republicans like to place all the blame on government programs like these, but the majority of subprime loans came from the private lending institutions, induced primarily to so by the low interest rates.

Mortgage fraud was everywhere; lending standards were lax; Rating agencies were giving triple A ratings to anyone and everyone.  Wall Street went into a speculative-frenzied casino mode, betting on who will and will not default on their mortgage loans.  The CDS and other derivative markets went nuts.

The recent use of subprime mortgages, adjustable rate mortgages, interest-only mortgages, and stated income loans (a subset of “Alt-A” loans, where the borrower did not have to provide documentation to substantiate the income stated on the application; these loans were also called “no doc” (no documentation) loans and, somewhat pejoratively, as “liar loans”) to finance home purchases described above have raised concerns about the quality of these loans should interest rates rise again or the borrower is unable to pay the mortgage.^{[39][85][86][87]} In many areas, particularly in those with most appreciation, non-standard loans went from almost unheard of to prevalent. For example, 80% of all mortgages initiated in San Diego region in 2004 were adjustable-rate, and 47% were interest only.

In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for buying subprime securities ^[88]

Some borrowers got around downpayment requirements by using seller-funded downpayment assistance programs (DPA), in which a seller gives money to a charitable organizations that then give the money to them. From 2000 through 2006, more than 650,000 buyers got their down payments through nonprofits.^[89] According to a Government Accountability Office study, there are higher default and foreclosure rates for these mortgages. The study also showed that sellers inflated home prices to recoup their contributions to the nonprofits.^[90] On May 4, 2006 the IRS ruled that such plans are no longer eligible for non-profit status due to the circular nature of the cash flow, in which the seller pays the charity a “fee” after closing.^[91] On October 31, 2007 the Department of Housing and Urban Development adopted new regulations banning so-called “seller-funded” downpayment programs. Most must cease providing grants on FHA loans immediately; one can operate until March 31, 2008.^[89]

Some believe that mortgage standards became lax because of a moral hazard, where each link in the mortgage chain collected profits while believing it was passing on risk.^[92] Mortgage denial rates for conventional home purchase loans, reported under the Home Mortgage Disclosure Act, have dropped noticeably, from 29 percent in 1998, to 14 percent in 2002 and 2003.^[93]

In March 2007, the United States’ subprime mortgage industry collapsed due to higher-than-expected home foreclosure rates, with more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.^[94] Harper’s Magazine warned of the danger of rising interest rates for recent homebuyers holding such mortgages, as well as the U.S. economy as a whole: “The problem [is] that prices are falling even as the buyers’ total mortgage remains the same or even increases. … Rising debt-service payments will further divert income from new consumer spending. Taken together, these factors will further shrink the “real” economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagnation or worse.”^[95] Factors that could contribute to rising rates are the U.S. national debt, inflationary pressure caused by such factors as increased fuel and housing costs, and changes in foreign investments in the U.S. economy. The Fed raised rates 17 times, increasing them from 1% to 5.25%, between 2004 and 2006.^[81] BusinessWeek magazine called the option ARM “the riskiest and most complicated home loan product ever created” and warned that over one million borrowers took out $466 billion in option ARMs in 2004 through the second quarter of 2006, citing concerns that these financial products could hurt individual borrowers the most and “worsen the [housing] bust.”

http://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble

Then Wall Street’s gambling got them in trouble.  The banks dump all their bad assets on us, the taxpayers.  Congress worried that if the casino imploded on itself, we’d all be wiped out.  The banks were infused with billions.  Do they learn from their wicked ways?  Nah.  They continue gambling and pay back the government with money they earned gambling in this casino.

Has there been any significant reform and regulation put in place?  Nah.

You know what I hate about all of this?  It’s all bankers, government, and big Wall Street finance groups.  The “shadow banking” complex, as many economists call it. Us normal working people are pulled into this corrupt system and what are we supposed to do?  These financial oligarchs are raping us.

Just the other day I replied to a comment Joshua left me, and I said,

To a large extent, I think people are religious because they fear death and find themselves in situations in which they feel themselves powerless to overcome. They also live such boring and empty lives, the thought that their life and destiny ultimately depends on them is a scary thought. But as mankind becomes more powerful as a species, and we’re no longer subject to the cruelties of nature in the same degree we are now, I think religious beliefs will slowly fade away. It’ll become irrelevant.

I’d like to bring in a little evidence to support my claim.  Check out this Gallup study on the correlation between religious belief and poverty.

http://www.gallup.com/poll/142727/Religiosity-Highest-World-Poorest-Nations.aspx#1

There’s some fascinating charts.  First you find that in impoverished nations, pretty much everyone is deeply religious.  Because these people’s lives consist of little but troubles and toil, their thoughts focus on the afterlife, or psychological techniques to achieve peace of mind in the hell all around them.  Being powerless and subject to the cruelties of this world to a degree we can hardly imagine, most of them place their hope in deities and other religious thought systems.

But as people’s income and quality of life increases, they care less and less about religion.  Once life becomes tolerable, you put and little money in their pocket, and they’re able to rise above bare subsistence and day to day struggle, religious devotion drops off very quickly.  If a person is able to achieve the quality of life of a low-paid custodian here in the USA, over half them will lose their religion.

And in general, if you further examine nations who have a strong focus on social programs which benefit their people, creating a strong middle class, religious belief plummets even further, some even under 20%.

There are exceptions to this.  We in the USA are a rich nation with a very religious citizen base.  Vietnam is a poor nation but its government in the past limited religious practices.  Estonia and Belarus are in there because the former Soviet Union restricted religious worship in these areas.  Overall though, my comment seems to be backed by the evidence – poverty and religion go together.