Is the cup half full or half empty? Does evaporation count? Is deflation inevitable? Even helicopter Ben may be running out of tools and ammo and if the property bubble bursts in China which is likely or their commodities takes a holiday, then things will really tank leading perhaps to a fatal error to cut government spending in the U.S. while cow-towing to various balanced budget amendments. There is rioting in England and that road show could be moving here. Rioting was pretty common as the Roman empire crumbled as well. The empire of Augustus only brought an uneasy peace. Social welfare, free food and free fun kept the excesses down, but it required little; rumor, bribes, populist rhetoric, to bring the mobs back into the streets. Its something to remember as we perhaps move into the autumn of our discontent. ….
The prospect of our economic progress leading to increasing numbers of educated manual and low food chain laborers being pitched to the wolves of chronic unemployment is a jarring political reality that has lead to a certain fragmentation giving rise to reactionism, populism as well as an earnest search to amicably resolve a crisis that is global.In particular, robotics, AI etc. have accelerated a rethinking of classic business models.
Over the past decade Foxconn’s success has epitomised China’s ability to take elegant designs from high-wage countries and turn them out cheaply in huge quantities. Initially applauded for its ability to create vast numbers of jobs, the company’s success has recently come to be seen in a harsher light. Last year there was a spate of employees at the Shenzhen plant committing suicide; in the latest such case, a 21-year-old worker threw himself off a building in late July. In May an explosion at a new factory in Chengdu killed three more employees and, it is believed, caused delays in production of Apple’s iPads.To pacify its increasingly restive workers, Foxconn has repeatedly bumped up their wages, improved facilities, provided counselling and swathed its factories with nets to catch anyone leaping from a window. All this has resulted in higher costs, and signs that the company’s hitherto hugely successful business model has run its course. At a closed retreat in late July, Terry Gou, the chief executive of the company unveiled a plan to replace a huge amount of human labour with robots by 2013.Read More:http://www.economist.com/blogs/schumpeter/2011/08/foxconn
From Michael Ferguson’s Future 101 blogspot:
Current technological capabilities in robotics and expert systems far exceed what is implemented in industry. Already, perhaps 50% of all jobs can be eliminated based upon what is ‘in the lab’. These include drivers, clerks, back office restaurant workers, medical technicians, many hotel workers, diagnosticians, lower level accountants, paralegals and lower level attorneys, various draftsmen and construction workers to name a few. When a job category begins to be eliminated, it will likely proceed very quickly as a start-up offers the new technology to industry which, driven by competitive forces, adopts them quickly.Read More:http://thefuture101.blogspot.com/
It does not appear that our current malaise, our festival of the Bear Market champions, will be technically classified as double dip, ot think of QE1 as a KFC double down- lots of volume not much nutritive value; after all its been three years and the financial viagara has produced an inevitable gone south direction. But, the indicators seem to be leaning towards the raised potential of another recession. Though, sine housing never recovered and likely never will from its coma, at least those stats won’t wonk the figures when the bean counters start swallowing. Still, the the question of whether it has already begun is a pertinent one given that GDP, job creation, income, net asset value, household worth etc. have never recovered from their peak before the last contraction phase.
That being said, the current market correction, at least at present, has given companies political cover to streamline- a euphemism for yanking jobs- and this unemployment for the most part is not likely to quickly rebound into new jobs at similar wages and benefits. At least in the short term. So, cleaning house is the order of the day; profits with minim
op line growth. The self-employed are making up a larger percentage of the work force, but the theory that will ultimately drive down the price of equities eventually, is plausible but a somewhat circuitous connection. There is so much riding on the financial markets in terms of pension values both private and public, that the means of de-leveraging from this dependence will be fraught with a level of panic and fear akin to close encounters of the third kind.
Normally, the business expansions and contractions were predicated and influenced by the manufacturing inventory cycle, with a fairly predictable recessionary pattern ranging from five to ten years. At least this was the experience that that economists that we covered in business school such as Samuelson and Lester Thurow came to understand and convey the mechanisms of the post war era. But, even then Samuelson grappled with understanding whether gambling and casinos and the burgeoning service sector could be a monkey wrench in the gears. And today, we have the production of ”virtual” goods through downloading technology which approach the cost of production/selling price ratio of printing money. In part, companies like Apple have a business model approaching a central bank. Our current crisis is a balance sheet cycle which implicates the tricky issue of deleveraging: increased savings rates, falling spending and some asset deflation as prices fall, though not in a generalized or linear fashion. What this means is that recoveries are fragile with the resultant spooking of markets based on small shocks which carry an exaggerated emotional potency. So, this my result in a new pattern of recessions washing ashore every three or four years with a new recession a distinct possibility. Of course, the accompanying joblessness is political suicide.
Whether a U.S. recession is a virtual certainty is not a slam dunk. The opinions of a Martin Feldstein and a Larry Summers are cause to pause, but then again, even smarter stock analysts have seen prognostications of certain equities such as Sino-Forest and RIM broken like a shattered mirror. In any event, recession risks are rising and until a policy shock from the Fed and helicopter Ben, recession risks are real and risk appetite, always a fickle beast, is being cautious. Like John Garner’s Grendel, it will gobble a few chosen stragglers but no banquet style feasts in the near future.
…and: The reason is that the money that is fed into the economy comes either from banking reserves or investments that are basically being traded around within a small community of investors. The banking money increases money supply and would be inflationary, save that demand and supply will increase to compensate. As capital is taken out of the publicly traded equity markets to be deployed in the start-up and private financing markets, publicly traded stocks will go down in value. This may be somewhat anti-stimulative. However, since few large investors margin their portfolio in order to make consumer purchases, this will be substantially smaller than the stimulative value of funding new businesses by at least an order of magnitude….
…Of course, no course of governmental action is feasible unless it can be explained to the bulk of the electorate in thirty seconds or less. If we can do this, it will be something like this, “We are going to entice the guy who has your future job to leave and start a new business. It will get you a job or a better job and it is the only plan that will work.’ Read More:http://thefuture101.blogspot.com/
…So the question is will the $110 billion be offset (the administration appears silent on this question and if the answer is yes – what are the offsets? – you could confiscate all the corporate jets flown by the Fortune 500 CEOs and not even begin to raise $110 billion dollars). The administration is going to have to be willing to give up a lot to get the payroll holiday extended (lobbyists are already beating the drums again for a repatriation holiday).
The same problems are at hand with the extension of the unemployment benefits. While the costs for an extension are somewhat lower (around $56 billion in the December 2010 bill) and there is an undeniable pull of compassion — the costs may cause a good deal of pause and will raise a call for a search for offsets – spending offsets – from Republicans. Read More:http://www.forbes.com/sites/deanzerbe/2011/08/09/obama-tax-proposals-to-create-jobs-no-magic-beans/