Save World, Construct

Krugman points out that the economic success of the South-West (Houston) and South (Atlanta) is caused by providing decent housing to the middle class: “Wrong Way Nation“.

Well, right, and very important. However, the problem is not restricted to the USA. It struck Japan very hard, 25 years ago: there was no more decent, affordable housing for Japanese workers in the main production centers.

And, yes, indeed. There is a housing crisis throughout most of the Western World, especially much of Europe. Massive construction programs there after World War Two promoted massive economic growth. A French saying goes:”Quand la construction va, tout va.” (When construction is OK, everything is OK.)

Instead of building increasingly better, denser cities, what happened in the last 40 years was an attitude of NIMBY (Not In My Back Yard). For example San Francisco built no skyscrapers for 30 years on the ground that they may throw shadows, sometimes (a curious idea in a city characterized by thick fog), or, horror of horrors, that San Francisco would turn into Manhattan.

The practical result has been that, not only quality of life of the middle class has gone down from Paris to San Francisco, but economies have stagnated, while lethal pollution has not been fixed (locally, or globally).

The middle class (let alone the lower class) has been increasingly unable to afford decent housing… in the most important cities. Instead an increasingly inefficient lifestyle of long range commuting ruled.

However, thanks to a new born common sense, young people are increasingly refusing the suburban, multi-car, long commute way of life, thus fleeing to live in ridiculous places such as Silicon Valley, characterized by having an affair with one’s car. Under pressure, San Francisco, I am happy to report, is Manhattanizing; youth devising new apps, prefer the City to unaffordable mansions in the woods, far from any trace of civilization.

Some of the new towers in San Francisco will provide the upper middle class with decent housing (instead of sky high rents in small, dank, mold ridden rabbit cages).

This, massive construction, is a solution for the entirely stagnating Western World: build more ecological, denser, high tech cities. Not only the economy will blossom, and society become more just, equalitarian and decent, but the biosphere outside of these more efficient centers of humanity, will be given an opportunity to recover.

Modern buildings can be not just energy efficient, but energy, and even food, producing. Especially tall skyscrapers. And to commute between city centers, 250 miles per hour electric trains are already a reality. London city center is just two hours from Paris city center, by the existing train, the Eurostar.

Off with anti-city mentality. Remember that civilization has to do with cities. Grow them right. To work!

Patrice Ayme’

Stagnation & PLUTOCRATIC INDEX

What drives economic and social stagnation? What drives the sort of stagnation ever more economists agree we are experiencing now? Well, the Greco-Roman example is clear enough. In Rome, three things got abated, causing stagnation: the law and justice, democracy, and, finally, after a few generations, technological progress became unable to sustain society.

Thus Greco-Roman society imploded spectacularly in nearly all ways, from intellect, to military, to demographics, economics, politics, justice, etc.

The beauty of my analysis is that, in spite of its variegated effects, the degenerative stagnation into oblivion of Rome had just one common cause: the blossoming of the plutocratic effect. In my book, plutocratization is not just an hereditary phenomenon, but also, more deeply, an effect on the mood, the mentality of the empire.

The Bluer, The More Owned By The Hyper Rich A Country Was in 2009

[The Gini index, above, is the one century old notion used to evaluate wealth; I boldly propose a more advanced and cynical notion, the plutocratic index; see below. In the picture above, one can see that the Gini coefficient correlates positively with violence in a society; also notice that Ukraine is much more equalitarian than Putin’s Russia.]

The reason I know that plutocracy in Rome was more than an hereditary class, and more of an inheritated mood, is unveiled by the unhappy fate of the Curiales, in the Late empire. (Except for the very richest Curiales, whose plutocratic influence allowed them to go tax free, a status those aristocrats kept until the Revolution of 1789, but for a nationalization under Charles Martel in 730 CE.)

Rich local authorities, members of the gentes  were ruined by their onerous charges. Even at the highest level, the Senatorial class, leading plutocrats were expected to spend so much of their personal fortunes in “philanthropy”, such as circus games, that it was difficult to maintain superlative standing for more than two or three generations… Except, of course, if one belonged to the imperial family (which maintained status, in the Orient, for centuries)

The stagnation of technological progress had two marked effects that made impossible the continuation of the fascist plutocratic empire:

1)      The technological advances needed to resist, or make irrelevant, the erosion of the resources enabling the old Greco-Roman economy were not made in a timely manner.

So, for example, Rome ran out of metals, precious or not (the mines were exhausted when using existing tech). This, in turn, caused a cascade of problems. For example, currency came to be viewed as worthless (because it did not have enough silver therein). Just as Europe around 1300 CE, the Roman empire also ran out of forests. Later it ran out of wheat, after the Vandals had taken over Africa and the Western Mediterranean.

2)      Enemies caught up with Roman military technology. Plutocratic Rome was unwilling, or incapable of adapting.

Military adaptation and adoption of enemy weapons and tactics had been the greatest strength of Republican Rome.

For example arrows from new composite double curvature bows would pierce Roman armor; heavy armored Parthian cavalry, the cataphract, was hard to stop. Roman armies took centuries to adapt, under the plutocracy, whereas such adoption of technologies took just a year under the Republic. One summer, the Romans, having captured a Carthaginian ship, decided to build a Navy, and it was done. For months, would-be sailors learned to row, in the dirt (while just created shipyards were building the ships).

Tech progress still happened, under the plutocracy, and saved Oriental Rome (that was its official title), and the Franks. The former developed Grecian fire (that destroyed thousands of Muslim ships in two memorable battles at the gates of Constantinople), and the latter had better steel.

However tech progress happened at an insufficient rate to allow the continuation of Greco-Roman civilization at anything approaching its old material, intellectual and demographic wealth.

Another factor that is the essence of remarkable nations anywhere was smashed in post-democratic, plutocratic Rome: animals spirits and freedom. Both degenerated extensively.

In Republican Rome, kings were abhorred. After four centuries of plutocratic Rome, emperors became officially gods, or then, the “13^th Apostle”.

The Roman plutocrats came to absolute power by killing the revolutionary fellow aristocrats, the Gracchi brothers, and more than 5,000 of their followers (in just one of the many bloody repressions). What the Gracchi wanted to do was simply to re-establish the absolute cap on individual wealth that had been Roman law for centuries.

Tremendously popular, extreme generals and Consuls such as Marius and Caesar, heads of the “Populares”, were unable to stem the irresistible rise of the plutocratic phenomenon.

The Roman People lost control of its destiny and in the following seven centuries. A succession of plutocrats came to rule (not necessarily from hereditary means only; those who were evil enough could accede to the pinnacle of power, too).

Ideas were often the ticket to expeditious death. Imagination collapsed, and so did birthrates. The passion for spectator sports became all consuming (the famous Nikka riots of the Sixth Century were all about chariot races, but emperor Justinian clearly saw that the Demos had gone mad, from lack of democracy; not knowing what to do, he nearly abdicated, and stayed on only at the insistence of his harlot like, gold digger wife ).

Plutocracy wants stagnation, especially mental stagnation. Because mental progress under plutocracy means revolution. In the literal sense of the term.

We have increasingly the same problem that the Roman society had, as the plutocratization index augments. How would I define the plutocratic index? How would it go further than the Gini coefficient?

The Plutocratic Index is, by definition how much the .1% not just owns, but CONTROLS.

For example, Putin, a plutocrat personally owns billions, but as president of Russia and plutocrat-in-chief, he actually controls most of Russian plutocracy (although his control is not absolute: Russian plutocrats store money outside of Putin’s control, as Putin himself said.) In any case, one can quickly deduce that a small oligarchy around Putin controls and owns 50% of so of Russia. Plus roughly 100% of the Main Stream Media.

Another example: private insurance companies drafted Obamacare, and one will want to estimate how much Obamacare can be viewed as their leased instrument.

Similarly, Bill and Melinda Gates have their fingers in the American public education pie, and one will want how of that they control. Similarly, Elon Musk, broke in January 2009, is now worth personally seven billions, after getting billions from the USA government: how much of those (public) funds can be viewed as under Mr. Musk’s control?

When Warren Buffet invested 5 billion in Goldman Sachs before the USA government invested 60 billion in that bank, how much worth did that control represent?

The plutocratic index would estimate how much, more generally, American plutocrats own and control the political and judicial systems of the USA (USA corporations are estimated, by themselves to hold 2 trillion dollars overseas, escaping the IRS).

As the Washington Post put it today in “Rich People Rule“: Drawing on the same extensive evidence employed by Gilens in his landmark book “Affluence and Influence,” Gilens and Page analyze 1,779 policy outcomes over a period of more than 20 years. They conclude that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”

If that is true, the Plutocratic Index is close to 100 in the USA. That is, the maximum.

The Plutocratic Index would be a much better measure than the Gini coefficient, and of great import, should we want to avoid the stagnation that affected Rome, and ended as an implosion.

Patrice Aymé

Note: The plutocratic index is harder to compute than the Gini Index, some will object. But the Gini itself is a cheat, because a huge amount of wealth and control is hidden by anonymous companies.

 

Inflation Now! (IN!)

All Too MILD INFLATION HELPS PLUTOCRACY & STAGNATION

Abstract: I have a question for the reality challenged economists who lead the West, in the ever deeper abyss of inequality:

What is best? 2% inflation and 10% unemployment (unemployment, or poor employment, not enough of a living wage)? Or would it be better to have 10% inflation and 2% unemployment?

The well paid dummies with “PhDs” have taken for granted that 10% (or actually 20% or more, see below) unemployment is better (not just in the USA, but also in Europe). Why? Presumably because they are philosophers! After all, PhD means “Philosophiae Doctor”, Doctor of Philosophy. What philosophy? Presumably, because they want to be loved and cuddled by the hyper rich. It’s a very cynical, morally corrupt career choice on their part.

The correct way to manage the economy is to start with the notion that everybody should be employed (decently; not like a slave!) Then a currency should be created. Then the rich. But contemporary economics is made the other way: first please the rich, then accommodate the rest (but without empowering it too much with crucial jobs).

Lack of inflation is deliberate, so is lack of (quality) employment. This is at the core of modern macroeconomics: the theory is actually called NAIRU. Let there be unemployment, so we can have serfs, say the rich, and then they eat caviar.

That mental corruption of macroeconomics had two main sources, one from mainstream American economists and the other in France. In the first case, plutocracy gave those fascist economists the sacred aura of “Nobel”, the inventor of dynamite, and of a famous prize. In the second case, in a phenomenon reminiscent of Obama, the French socialists were desperate to be esteemed by those with money. Both, in turn, contaminated the American and European central banks with an anti-inflation theory that advantaged the hyper rich.

I have dealt with that subject many times in the past, such as in “4% INFLATION BEST“. Adding dimensions to what Paul Krugman says, I sketch why inflation is good. One can summarize that the fight against inflation has been a fight for plutocracy and stagnation, in Europe, or the USA.

***

Another good editorial of Paul Krugman on an interesting subject. Inflation. In “Not enough Inflation“. Krugman points out that, by law, the Central bank of the USA, the “Fed”, is supposed to worry as much about inflation as about unemployment.

“At this point, inflation is once again running a bit below the Fed’s self-declared target of 2 percent.

Now, the Fed has, by law, a dual mandate: It’s supposed to be concerned with full employment as well as price stability. And while we more or less have price stability by the Fed’s definition, we’re nowhere near full employment. So this says that the Fed is doing too little, not too much.”

It is actually the ECB, the European Central Bank, that fixed, long ago, the 2% target for inflation. To indicate how silly all these things are, when European wise men, many of them French socialists (caviar prone), set up the European monetary Union, they “forgot” that unemployment was an important notion. So the mandate of the ECB is only to contain inflation. No wonder unemployment is now approaching some astronomical levels in parts of Europe.

Let’s think about this a moment. One has to realize that what is meant by “unemployment” is people who are so actively looking for work, that they enter the government statistics. Those who have given up don’t count. So, for example in the USA, there are at least twice more of the latter than the former. So real unemployment is closer to 20%.

Unemployment rate U2 is a matter of propaganda, short term. The relevant notion is the employment participation rate exhibited here: not so good! Bad from too much austerity in money supply…

Of the working age population, be in the USA or in Europe, barely more than half work. Most famous economists, the Chicago Boys, the Austrian School, are involved in a theory that will someday be viewed as a fig leaf for plutocracy. It relates inflation and unemployment in a… virtuous relationship.

According to this view, promoted by the (fascist Pinochet loving and employed) gnome Nobel Friedman, full employment means the lowest level of unemployment that can be sustained given the structure of the economy. What plutocrats and their lovers mean by sustenance is: they eat caviar, and they send the police to keep you happy with your unemployment.

Using the terminology from Nobel James Tobin (following Nobel Franco Modigliani), full employment is achieved by implementing the Non-Accelerating Inflation Rate of Unemployment (NAIRU).

That’s when the real gross domestic product equals potential output. Supposedly. Whatever. Even Wikipedia adds tersely: “This concept is identical to the “natural” rate but reflects the fact that there is nothing “natural” about an economy.”

Indeed. What’s an ‘economy’? it’s a way to manage (“nomy”) a house (“eco”). I always say this, because that is of the essence. One make the house Pluto’s house, and then one gets a “plutonomy” (the term invented and used by the biggest banks to qualify their vision of the economy).

***

INFLATION IS GOOD FOR THE DEMOCRATIC ECONOMY:

Here is Krugman again, rolling two good reasons for inflation: debt reduction and injecting cash, thus activity in the economy: “would a rise in inflation to 3 percent or even 4 percent be a terrible thing? On the contrary, it would almost surely help the economy.

How so? For one thing, large parts of the private sector continue to be crippled by the overhang of debt accumulated during the bubble years; this debt burden is arguably the main thing holding private spending back and perpetuating the slump. Modest inflation would, however, reduce that overhang — by eroding the real value of that debt — and help promote the private-sector recovery we need. Meanwhile, other parts of the private sector (like much of corporate America) are sitting on large hoards of cash; the prospect of moderate inflation would make letting the cash just sit there less attractive, acting as a spur to investment — again, helping to promote overall recovery.

In short, far from fearing that more action against unemployment might lead to an uptick in inflation, the Fed should actually welcome that prospect.”

There are deeper reasons for wanting inflation, but those, contrarily to Krugman’s above, are not in economic textbooks. Actually I have not come across them anywhere, but on my sites. Those reasons involve deeper psychology.

The hyper rich, the plutocrats have, since time immemorial, lived of rents. (In the nineteenth century, hyper rich were called “rentiers”, that is, people who perceive rents. The archetype of rents is payments from government bonds. ever since there are government bonds and that goes back centuries (France, Britain, and, earlier, Italian Middle Age republics).

Why so? Because money is power. One of the reasons people want power is that they prefer to enjoy more and do less. A rent, government bond style, is perfect for that. It’s passive income, no risk (or as little risk as possible). Real, active investments in the economy are exhausting: one has to watch over them, manage them, think, work.

This is why the hyper rich have pushed governments, in Europe and the USA, to live off borrowing money from them ever more. The more governments borrow to the hyper rich, the richer, and the more lazy the hyper rich can get.

Another thing the rich detest is to see their capital evaporate. So they detest inflation.

So in 1973, the right-wing government in France passed a law allowing government to borrow from the hyper rich. Hence the obsession with inflation started in Europe. The hyper rich were able to persuade the French socialists that, to be mature, they had to be anti-inflation. (By the way, the fact that, to show that they are mature, left-wing people have to please wealth contaminated Obama, in a similar way: that is why Obama, just like the French socialists in the distant past, implemented mostly policies to please wealth. By opposition, to please dozens of millions of ex-soldiers after world War Two, even the right-wing governments in the USA and Europe conducted very left-wing policies: marginal tax rates under Eisenhower were higher than what the French socialists now propose).

To show the wealthy that they were good citizens, the French socialists  fabricated a monstrous machine, the European Monetary Union (EMU), where the states would be financed, not by themselves, by rising taxes, or by going to their central banks, but by going begging to the hyper rich private individuals and banks.

In other words, plutocracy had captured the minds of the socialists builders of Europe to a point not even seen in the USA. That way, far from being a union of welfare socialist states, the EU turned into a plutocrats’ paradise.

Work resist to inflation, because work is always needed, so work can always ask for enough money to live.

That, of course, before work got farmed out to China. And that gave one more good reason for plutocrats to farm out work to China: it would kill both work and inflation, two enemies with one stone.

New technology also loves inflation, because it forces people to re-examine their old habits, relative to the new temptations.

Why “4% Inflation Is Best” goes over all this in more details.

4% inflation is not really an over-statement, as 2% inflation is way too close to deflation. Some will say: oh, but real inflation is well above 4%. Well, this is a related can of worms. Governments have interest to underestimate inflation, so that they will diminish the payments they have to make to veterans, retirees, the down and outs, etc. So they have invented “hedonistic” adjustments to cheat on inflation where it hurts the most.

Where it hurts the most? Well where it hurts the People the most. If the plutocrats can inflate up their rents, they are all for it. That is why there is so much inflation in school costs, health costs and prison costs. In all cases, one notices the inflating payments go to plutocrats.

Progressives ought to want good inflation: by the People, for the People. They ought not to want hedonistic inflation, by the plutocrats, for the plutocrats.

***

Patrice Ayme’