Black Monday 2: Economic Boogaloo

[Hlafordlaes]

Last year we had a good spring, but the then-current news about sovereign debt in late May was enough to give us our worst June yet, and a really poor summer season.

This year, given the rather dire current news, I was expecting the "number 2" hitting the ventilator scenario.

Business is pretty much up. Weird. Still holding my breath, though.

[HenrikOlsen]

Perhaps it's the tourists going "Yay! Their economy's tanking, things are going to be cheap".

[peteshimmon]

Its funny but production of essentials
(however you define that) has gotten more
and more efficient over the decades requiring
less and less workers. And production still
goes on. And wealth is earned, taxes paid.
All the current wailing seems to be the lack
of "froth" (however you define that) to soak
up spare labour.

I would say that it should be made clear to
unemployed people that things are not their
fault.

[publius]

Moody's just cut Spain *three* notches in one swoop, down to the lowest investment grade level. They mentioned the possibility of a "sudden stop" in their analysis.

[mike alexander]

Way back in the 60's, Arthur Clarke, noting the increasing automation in industry, pondered the 'disinvention of work'. The logical progression of productivity means eventually most people will not have work in our sense. No one really wants to talk about this, since it goes against firmly entrenched ideas about value and self-worth.

[publius]

And now Cyprus needs a bank bailout:

http://online.wsj.com/article/BT-CO-...13-715227.html

According to that, they've been trying to get a loan from Russia, the amount of which is 25% of their GDP.

[HenrikOlsen]

Moody's just cut Spain *three* notches in one swoop, down to the lowest investment grade level. They mentioned the possibility of a "sudden stop" in their analysis.

So basically we've just seen 100 billion euro thrown away for nothing?

[Hlafordlaes]

Way back in the 60's, Arthur Clarke, noting the increasing automation in industry, pondered the 'disinvention of work'. The logical progression of productivity means eventually most people will not have work in our sense. No one really wants to talk about this, since it goes against firmly entrenched ideas about value and self-worth.

There's a post over on the Physicsforums along similar lines.

[mike alexander]

Profession that require knowledge, skills and, oddly, an aesthetic will last longer. Something like landscaping comes to mind. Capability Brown could be resurrected today and find work.

[Ara Pacis]

Yeah, I've mentioned it before in these threads and some newbie jumped me and accused me of being a rabble-rouser elsewhere on the internet simply because I recognized the same thing lots of people have noticed over the last few decades/centuries, Structural unemployment will happen. Pro-work-ethic types rail about lazy-ne'er-do-wells, because they can't find work... or make work. I don't know why some people seem to value labor so much when they're not willing to pay what they think it should be worth. But it has to the the actual work, not just the concept of working in order to not be lazy/idle because then its starts to sound like make-work and leads people towards controversial economic-labor models. I wish people could share jobs using some sort of flex-time or bi-weekly schedule, which is doable for manufacturing and service labor, but that's not really doable in some positions because a company needs continuity of action, so some people are always gonna be over-worked. The people who are in those standard work/over-work jobs are going to resent the people who are in the half-time jobs if they get equal pay. So, as a simple matter of mathematics, there will be a level where people get better off or stay at a normalized level of employment and income, and there will be a lower level that will experience a loss of valuation of their skills, a subsequent reduction in pay, and opportunistic loss of hours in which to earn that pay, and due to current compensation models in the US, reduction or loss of benefits for health, retirement, etc due to an time-related ineligibility rules.

One solution is to unify the system, but that's not popular for certain reasons I can't get into. Another solution would be to create duplication of efforts by way of increased fragmentation of business entities into smaller ponds, each of which can have it's own big fish. Not sure if that's too political or not.

[aquitaine]

I don't know why some people seem to value labor so much when they're not willing to pay what they think it should be worth. But it has to the the actual work, not just the concept of working in order to not be lazy/idle because then its starts to sound like make-work and leads people towards controversial economic-labor models

Isn't it the general labor market that determines wages? Labor itself isn't inherently worth anything, it's worth whatever the market at any given point says it's worth for that particular position.

I wish people could share jobs using some sort of flex-time or bi-weekly schedule, which is doable for manufacturing and service labor, but that's not really doable in some positions because a company needs continuity of action, so some people are always gonna be over-worked.

I've heard many cases of companies doing this as a cost cutting measure to get by in leaner times. It does make sense in that situation because it helps to retain talent, but it means reduced wages, often significantly reduced.

[Ara Pacis]

Isn't it the general labor market that determines wages? Labor itself isn't inherently worth anything, it's worth whatever the market at any given point says it's worth for that particular position.

That's certainly one of the ways people view it.

I've heard many cases of companies doing this as a cost cutting measure to get by in leaner times. It does make sense in that situation because it helps to retain talent, but it means reduced wages, often significantly reduced.

In a deflationary or post-robots/AI-as-technological-singularity-world, it may become de rigueur.

[profloater]

I think it is safe to assume rich people will prefer to buy goods made by people rather than by machines as soon as it has exclusivity so we will have crafts again and skills, but a lot of plain old consumers.

[peteshimmon]

The lesser mentioned Vonnegut novel, Player
Piano is a good read concerning work automation.
He describes spare people being conscripted into
a Reconstruction and Reclamation Corps. They do
simple tasks over the country. Good folk eager
to do a job and help the aristocracy. The
Engineers! Well that is how it comes across
remembering the last time I read it.

[Heid the Ba']

I think it is safe to assume rich people will prefer to buy goods made by people rather than by machines as soon as it has exclusivity so we will have crafts again and skills, but a lot of plain old consumers.

I don't think it is safe to assume this. Rich people will pay a premium for exclusivity or quality, being made by hand does not guarantee either. Rolls Royce cars are largely built by robot, Hindustan Ambassadors are largely handbuilt but you can't give them away in the UK. Saville Row suits are no more hand sew than M&S suits but are much higher quality. In both cases it is the quality that costs, not the method of manufacture.

Many rich people get rich, and stay rich, by not throwing money about. Look at the carpark of your local Lidl or Aldi for confirmation of that.

[Hlafordlaes]

One potential industry for manual labor is recycling, along the lines of tearing down old factories, bridges etc. Not a total solution, but seems a good fit for humans in the post-industrial age.

[Extravoice]

It may be time to get out the popcorn (or head for your bunker, if you are so inclined).

Spanish and Italian interest rates have jumped, with Spain's 10 year bond yields hitting the magic 7% point.
Plus the Greek Election is this weekend.

[publius]

Remember the Greek swap deal that our old buddies at Goldman Sachs put together to help Greek hide its true debt and borrowing levels (and make Goldman a nice little profit for their trouble)? Bloomberg sued the ECB under FOI rules to get some memo/paper about this back in 2010. They just got around to a hearing:

http://www.bloomberg.com/news/2012-0...e-markets.html

A lawyer for the ECB said releasing such information would roil the markets too much, harming Greece had it been released back in 2010 (that horse is well out of the barn by now), and now would harm Spainish borrowing.

Now, also keep in mind the current head of the ECB was a Goldman executive during the period when the Greek deal was afoot.

[publius]

The markets popped on a rumor (a coordinated rumor) put out that there would be coordinated central bank action "if need be" after the Greek election Sunday. IOW, the rumor is the central banks, including Helicopter, will fire up the printing presses in turbo mode "if need be" and blow money out of their rear ends faster than they ever have before or whatever.

[Extravoice]

This is why I will never make a killing in the stock market.

• The Greek election is this weekend, and the outcome is uncertain.
• The French and German prime ministers continue to squabble.
• Spanish and Italian borrowing costs are up.
• Egypt's government is in chaos.

With all that uncertainty, I expected the a market sell-off this Friday afternoon in NY.
Instead the DOW closed up 115 points.

At least I've learned that I'm not smart enough to predict the stock market, and didn't do any trading based on my analysis.

[publius]

At least I've learned that I'm not smart enough to predict the stock market, and didn't do any trading based on my analysis.

Ditto and Amen.

If you can believe the explanations for why (and I wouldn't put any money on the line for such of course), this was a bad news is good news rally because things are getting so bad, the central banks must act and hand out more free money.

[profloater]

That thing about "markets can stay irrational longer than you can stay solvent" really is true, what will black Monday bring this time?

[profloater]

it might be interesting to catch the Reith lecture Niall Fergussen on the role of institutions in world economies, especially as it looks just now as if Greece is voting for the package,,,just.
http://www.bbc.co.uk/news/world-18456131

[publius]

Well, I'll be. Pro-bailout New Democracy has apparently won a plurality over Syriza by a smidge. With the 50 seat bonus the winner gets (I assume this is a special provision of a do-over election to make it easier to form a majority), they can form a pro-bailout, pro-euro coalition with PASOK, assuming PASOK goes along.

The markets should soar on this, but as Extravoice notes, don't bet any real money on it.

[publius]

Not so fast.....

Latest is the leader of PASOK has said they *will NOT* join a coalition with ND unless Syriza also joins. Syriza has rejected joining any such pro-bailout coalition.

What PASOK is doing is trying to force Syriza to join in to take the blame. If they go it alone with ND, then they, the two traditional parties which have ruled Greece for the last near 40 years, will take all the blame for austerity/debt slavery alone. PASOK wants to force Syriza to join in and share the blame.

[publius]

Just reading some analysis (and again, don't bet any real money on it!): Assuming ND and PASOK form a pro-euro/austerity coalition, they've just managed to kick the Grexit can down the road for another few months or so. Greek GDP will contract another 7% this year and they will not meet the targets. Debt to GDP will be getting worse, not better, and we'll have another crisis come October or November, just in time to coincide with our own election.

[publius]

Dare I wonder if Grexit (and Spexit, Itexit, Frexit, Germexit, etc-exit) may all come at once on -- wait for it, drum roll .......

Dec 21st, 2012, at 11:11AM.

[Ara Pacis]

Dare I wonder if Grexit (and Spexit, Itexit, Frexit, Germexit, etc-exit) may all come at once on -- wait for it, drum roll .......

Dec 21st, 2012, at 11:11AM.

Then I can play a bunch of R.E.M. songs. Come to think of it, there are so many that fit.

[Hlafordlaes]

I confess I come back and check this thread all too often. It's like peering into the fog wondering when an arrow will come zipping my way. Fate, just get it over with, for crying out loud!

I'm gonna go watch some non-news TV and enjoy, yes, some dip.

[profloater]

hear hear, how long can this crash go on, it's like the van falling off the bridge in Inception? The figures are in one pan and the politicians are in the other but we can see there is no balance. I have a vested interest as a small manufacturer I need people to buy things, but the poor guys can't borrow and the rich guys are waiting for Godot. This is a world fit for speculators.