'The act was stealthily tucked into a bloated 11,000 page conference report when no one was looking, and passed by a lopsided 377-4 margin during a lame-duck session with a veto-proof majority -- not that it needed one. President Clinton, who had been lobbying behind the scenes in support of the act while publicly harrumphing about the evils of deregulation, signed it into law without batting an eye'.
Below you see the conspiracy being built by Republicans to create this casino Wall Street and made sure Bush hit the Presidency to turn a blind eye to all of the corporate/Wall Street fraud that moved all the nation's wealth to the top. Meanwhile, Republicans are yelling at Clinton neo-liberals as Democrats as the pols tied to all this Wall Street casino cronyism/monopoly killing free-market economy in US. It was when Obama installed all of Clinton's former staff that we knew Obama was not a social progressive but a right-wing corporate globalist who would be a third term of Bush.
Read the Bill: The Commodity Futures Modernization Act
Posted on December 17, 2015 |
Great article written in 2009. There is an article written on Crooks and Liars that Bernie Sanders voted for a bill to help crashed the economy. This article clears up how Senator Phil Gramm made sure deregulation for Wall Street.
APRIL 1, 2009, 1:07 P.M.
In the waning days of the 106th Congress and the Clinton administration, Congress met in a lame-duck session to complete work on a variety of appropriations bills that were not passed prior to the 2000 election. There were other, unmet pet priorities of some lawmakers that were under consideration as well. One of those pet priorities was a 262-page deregulatory bill, the Commodity Futures Modernization Act. Tucked into a bloated 11,000 page conference report as a rider, with little consideration and no time for review, this bill would be viewed only eight years later as part of the failure of our political system abetting a financial storm that brought the world to its knees.
The chairman of the Commodity Futures Trade Commission (CFTC) Brooksley Born issued a first callfor her regulatory commission to have power to oversee financial derivatives. While previous legislative attempts had been made earlier, Born’s efforts were the most direct and threatening to the financial industry. During an April 1998 meeting of the President’s Working Group on Financial Markets, Federal Reserve chairman Alan Greenspan, Clinton Treasury Secretary Robert Rubin (and later Secretary Larry Summers), and Securities and Exchange Commission (SEC) chairman Arthur Levitt opposed Born’s efforts and attempted to derail her.
Soon afterwards, Born released a “concept” paper with ideas of what regulation of derivatives and swaps could look like under the CFTC’s oversight authority. The response to Born’s paper was swift. The financial industry and government officials responded fiercely in opposition to Born’s ideas. Greenspan, Summers, and Senate committee chairmen all criticized her and her proposals.
In the midst of this debate Long Term Capital Management (LTCM), a major hedge fund employing some of the top economists, collapsed. LTCM was highly over-leveraged and held a big portfolio of swaps. In the end, during the government organized bailout of the company, LTCM recorded a loss of $1.6 billion on swaps alone.
Born felt that an unregulated derivatives market that spawned the LTCM bailout could “pose grave dangers to our economy.” In the end, Born lost her battle and, in May 1999, asked to be replaced as CFTC chairman. The new chairman, William Rainer, was more amenable to the positions of industry leaders and the major government officials Summers, Greenspan, and Levitt. Later that year, the President’s Working Group on Financial Markets released a report calling for “no regulations” of derivatives and swaps and began crafting a program to make that possible. Meanwhile in Congress, lawmakers were still up-in-arms over Born’s attempts to regulate the financial derivatives market and began working to pass their own set of deregulatory language.
Leading the charge in Congress were Sens. Phil Gramm (R-TX) and Richard Lugar (R-IN) and Rep. Thomas Ewing (R-IL). In May of 2000, Rep. Ewing introduced his Commodity Futures Modernization Act. While Ewing’s bill sailed quickly through the House, it stalled in the Senate, as Sen. Gramm desired stricter deregulatory language be inserted into the bill. Gramm opposed any language that could provide the SEC or the CFTC with any hope of authority in regulating or oversight of financial derivatives and swaps. Gramm’s opposition held the bill in limbo until Congress went into recess for the 2000 election.
Throughout the better part of the year Gramm, Lugar and Ewing worked with the President’s Working Group on Financial Markets—most specifically, Treasury Secretary Summers, CFTC Chairman Rainer and SEC Chairman Levitt—to strike a deal on the bill.
“Details of the final language are not immediately available.”
Little attention followed Congress as the contentious 2000 presidential election was stuck in a stalemate as lawyers and khaki-clad protesters fought over the Florida recount to decide whether Gov. George W. Bush or Vice President Al Gore would be the next president.
During a lame-duck December session, while the media was focused on the recounts and court cases, Gramm and Ewing sought to strike a compromise on the Commodity Futures Modernization Act. The day after the Supreme Court ruled in favor of Gov. Bush, December 14, Ewing introduced a new version of the Commodity Futures Modernization Act. On December 15, with little warning or fanfare—aside from the overshadowed discussions on the floors of Congress—the new, compromise version was included as a rider to the Consolidated Appropriations Act for FY 2001, an 11,000 page omnibus appropriations conference report.
The new version of Commodities Act allowing no regulation or oversight of derivatives came after the Supreme Court ruled for Bush----that was what gave us today's Wall Street and it was Republican all the way. Keep in mind it was never legal for a Supreme Court to make an election decision---Gore had won and would have been President if not for election poll frauds.
HedgeWorld Daily News, a trade publication for hedge funds and one of the few news outlets following the bill, stated, “Details of the final language are not immediately available. Congressional aides said Sen. Gramm did succeed in getting additional language protecting the legal certainty of swap, especially those traded by banks, which are the main users of the products.”
The final language, which the public was hardly aware of, contained some new sections not in the original Ewing bill that, for all intents and purposes, exempted swaps and derivatives from regulation by both the CFTC, which had already implemented rules that it would not regulate swaps and derivatives, and the SEC. Also, hidden within the bill was an exemption for energy derivative trading, which would later become known as the “Enron loophole” – this loophole would provide the impetus for Enron’s nose dive into full blown corporate corruption.
If your goal is to move massive amounts of wealth to the top creating the same extreme wealth inequity as exists in third world nations----if your goal is to break apart any way for workers to gain power to climb back into a middle-class-----if your goal is to create a void in the US economy big enough to install International Economic Zones operating in the US as they do overseas-----then you use the Commodities Act and derivative leveraging to create these boom and bust economies the US has had since Clinton. Derivative leverage simply means they took all American savings, 401Ks, pensions to leverage extreme debt using that leverage to expand overseas and when the economy would not take anymore of this FAKE debt it would collapse. This is why it was so important that the Commodities Act was paired with breaking Glass Steagall------they wanted to use the safe banking assets as leverage. Nowhere to go to protect against Wall Street using any retirement or savings as fodder.
THIS IS WHY WE NEED LOCAL PUBLIC BANKS. WE MUST HAVE A SAFE SOURCE FOR OUR CITIZENS' WANTING VANILLA PACKAGE 3% INTEREST ON SAVINGS AND RETIREMENTS AND WE NEED TO PROTECT OUR CITY AND STATE REVENUE FROM THIS PONZI-SCHEME. MAKE NO MISTAKE---IT IS ALL ILLEGAL AND UNCONSTITUTIONAL.
Besides the leverage and breaking down US citizen's ability to keep savings and retirements----this boom and bust created more opportunity to push more small businesses out of business and to create this NEW employment structure of citizens working part-time, temporary, for non-profits that are not real businesses. This gained traction all through Bush fed by the Technology bubble crash and recession and Obama made this soar after the 2008 economic crash and recession. If you knew all this national public policy history----you knew in 2009 that all Obama's policies would be posing progressive as he simply installed more of this global corporate wealth and power. Locally, O'Malley was a raging Clinton/Bush Wall Street globalist------he didn't care whether Bush/Johns Hopkins neo-con or Clinton/Obama neo-liberal-----he installed all the structures needed to advance this International Economic Zone NEW WORLD ORDER AND IT IS ALL FAR-RIGHT WING REPUBLICAN-----
YOU SEE THE NEXT BUBBLE BEING THE BOND MARKET COLLAPSE AND ECONOMIC CRASH COMING AND THAT WILL BE DEEP AND LONG-TERM---A DECADE TO INSTALL INTERNATIONAL ECONOMIC ZONES WITH GLOBAL FOXCONN CORPORATE CAMPUSES AND FACTORIES.
I knew in 2009 the FED and Congress were installing policy for the next bubble----the super-heated US Treasury/municipal bond market that is going to collapse soon and because of that----I knew all the policies from Maryland Assembly and Baltimore City Hall were bad for citizens. I only knew that because I follow public policy at all levels. Unemployment today is reaching 35%------they expect this coming economic crash and recession to push that above 50%.
I could not post this article completely and it has great graphs----please visit the article online.
We May Be On the Verge of the Next Major Bubble Boom
By Jesse Colombo
This report was published in April 2012.
I’d like to present a theory that I’ve developed in recent months, though I must emphasize that this is a theory for now and not yet an outright prediction. The scenario that I will discuss is indeed probable and realistic enough to warrant vigilantly monitoring the global economic situation to see if it unfolds according to the framework that I have laid out in this report.
My hypothesis is that the world may be on the verge of a massive economic bubble boom that could come out of left field and take the whole world by surprise.
This Hypothesis is Based On My Skepticism of Central Banking
My basis for this coming bubble boom hypothesis comes from my justifiably skeptical understanding of how central banks such as the U.S. Federal Reserve work and their role in creating economic boom, bubble and bust cycles. In simple terms, central banks are entities that are independent of governments that have been given the responsibility of managing a nation’s currency and determining the cost, in the form of interest rates, of money that is borrowed from the nation’s banks. Central banks manipulate interest rates for the purpose of guiding a nation’s economy through business cycles with a minimal amount of economic risk and inflation, though it rarely works this way in practice. Quite the opposite of their purported intention, central banks’ management of the business cycle is notorious for creating wild economic swings, extreme economic distortions and speculative manias, such as the late 1990s Dot-com bubble and the disastrous mid-2000s housing and banking bubble. A truly free-market monetary system without a central bank altogether would result in a far more stable and organic economy.
Central banks guide the business cycle by raising or lowering the cost of borrowing from a nation’s banks; when the economy is too slow such as during a recession, central banks lower interest rates for the purpose of stimulating borrowing and jump-starting economic growth. When economic growth becomes too rapid and results in excessive and risky borrowing and inflation (such as during the peak of the U.S. housing bubble), central banks try to slow the economy and inflation by increasing borrowing costs and reining in the growth of credit. The process of reining in credit growth often results in an abrupt economic slowdown or “hard-landing,” which is what happened after the Dot-com and housing bubbles were “pricked” by the U.S. Federal Reserve. Upon an economic slowdown or recession, central banks ease credit conditions and start the cycle all over again.
Central Banks Can Create Economic Growth, But It’s Bubble-Based Growth
Central bank manipulation of the business cycle is nothing short of artificial market interference and, while central banks usually nominally accomplish their goal, the end result is an artificial business cycle that is extremely prone to creating economic bubble booms rather than sustainable economic growth. The powerful economic shocks caused by the popping of the Dot-com bubble and the September 11th 2001 terrorist attacks spurred the U.S. Federal Reserve to slash interest rates from 6.5% to 1%, a four-decade low, to prevent the country’s economy from plunging into a deep recession. While extremely low interest rates assuaged financial markets (partly because low rates forced fixed-income investors into riskier assets like stocks), the economy experienced an unusually-anemic “jobless recovery” until approximately mid-2004.
By mid-2004, ultra-cheap credit and therefore mortgages caused a decade-old bull market in housing prices to soar in a parabolic fashion, creating an explosion in housing-related economic activity and demand for construction workers, mortgage brokers and realtors. (It was around this time that I built my first website to warn millions of people of the housing & banking bubble.) As the housing bubble-based recovery accelerated, newly-employed workers and suddenly-rich homeowners started spending money very freely, in turn creating more jobs and economic growth outside of the housing sector. Economists, business leaders and politicians alike cheered-on the recovery largely unaware that the economic growth was built on the back of an unsustainable bubble that would pop disastrously a few years later. Central banks are certainly able to spark economic growth by providing large quantities of cheap credit, but the growth is most likely to occur in the form of economic bubbles that pop even harder in the end rather than true organic economic growth. (I call this phenomenon a “bubblecovery” = a “bubble recovery.”)
Is 2012 This Business Cycle’s Equivalent to 2004?
Central banks, through their blunt tools of monetary policy, are constantly creating new economic bubbles to replace the last bubble that popped; they created the housing bubble to replace the Dot-com bubble and you had better believe that they are actively inflating another bubble (or bubbles) as we speak to replace the housing bubble. As one of the first people to have spotted and warned on a large-scale of the nascent housing bubble in 2004, I have to say that I see many parallels between the late-2003/early-2004 period and the first few months of 2012. Both time periods were approximately 2.5 years after a recession had officially ended (the first recession ended in November 2001, the second recession ended in June 2009) and both came on the heels of tepid “jobless recoveries.” Both periods also occurred after several years of economic “deep-freeze” and strongly negative public sentiment, contrasted with an extremely confusing and seemingly-unwarranted rise in stock prices (partly due to low interest rates forcing investors into riskier assets like stocks). Last but certainly not least, both time periods were marked by extremely stimulative monetary policy courtesy of central banks (this topic will be greatly expounded upon shortly).
With all of the parallels between the early-2004 and early-2012 periods, the only element that I haven’t yet mentioned is today’s housing bubble-equivalent that will come out of left-field and surprise the world by generating economic growth, new jobs and eventually result in economic euphoria again. I strongly believe that I have identified this Next Bubble – except that there are eight of them this time around. These bubbles are: China, Commodities, Canada, Australia, College (U.S.), Healthcare (U.S.), Emerging markets & Social media and I’ve developed an acronym to help easily remember them, “CCC Aches.”
As with housing in 2004, the “CCC Aches” booms/bubbles have already boomed for a decade (the housing boom started in the mid-1990s (see chart), the “CCC Aches” boom started in the early-2000s) and have been the major contributors to economic growth and job creation through the recession. The very recovery from the Great Recession is due in a large part to the continued growth of the “CCC Aches” bubbles. Just as economists were cheering on the home construction boom and all of the new construction jobs that it created during the last bubble, economists are now cheering on the U.S. medical building boom and the incredible number of new healthcare jobs that are being created. By sending a “false signal,” central bank-fueled bubble booms trick nearly everybody into believing that they are legitimate and sustainable “engines of growth.”
After a decade of steady growth, the housing boom experienced a final explosive phase starting in 2004 (see chart), catalyzed by a thawing post-recession economy and abundant quantities of extremely cheap credit. My hypothesis is that the “CCC Aches” bubbles may soon experience a mania phase of their own due to very similar reasons that caused U.S. housing bubble in 2004. Bubbles typically experience mania phases during the maturity stages of their life-cycles because investors and other participants become overconfident and extrapolate continued growth very far into the future after an already long period of steady growth such as the decade-long period of growth that housing had already experienced by 2004. After a long boom, many participants develop cult-like attitudes and display thinking patterns such as, “housing prices never go down!” or “people will always need healthcare and prices only go up, up, up!”
This chart shows the typical psychological stages of bubbles:
Republicans and Clinton neo-liberals wanted to use all that public wealth accumulated since the Great Depression-----the homeownership----the retirement and pension savings-----the SS Medicare Trusts AS DERIVATIVE LEVERAGE writing the rules to only protect the rich when they imploded these markets. That's why the rich always keep their gains---their gains being main street's loses every boom and bust. Clinton's Technology Bubble, Bush's Mortgage Loan Bubble, and now Obama's US Treasury/municipal Bond Bubble all designed to leverage with American citizens' wealth derivatives to $700 trillion dollars to expand wealth overseas----and then simply allows all of these FAKE transactions to disappear with our pensions, retirement 401Ks, SS/Medicare Trusts stored in the US Treasury. Each time these bubbles grew bigger because Wall Street was accumulating trillions of dollars with each crime and each time the unemployment in the US grew more and more long-term because there was never any real job creation. Make no doubt, all of this was fraud.
WE MUST STOP THIS COMING BOND MARKET FRAUD. STATES LIKE MARYLAND ARE SOAKED IN CREDIT BOND DEBT JUST SO ALL GOVERNMENT ASSETS AND REVENUE FOR DECADES WILL BE TAKEN BY THIS BOND FRAUD. THE BOND DEALS MUST BE RE-WRITTEN IN THE PUBLIC INTEREST AND WE MUST HAVE CITY HALLS THAT WILL REJECT ATTEMPTS TO ALLOW THESE WALL STREET DEALS BE LEGITIMATE. REJECT THE BOND DEBT AND CITIES LIKE BALTIMORE CAN RETURN TO REBUILDING A LOCAL, DOMESTIC ECONOMY MINUS WALL STREET FINANCIAL INSTRUMENTS AND GLOBAL CORPORATE CONTROL OF OUR ECONOMY.
We leave the last word to the real Maestro
“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”
– Ludwig von Mises'
The global economy's decade of debt-fuelled boom and bust
Borrowing was both the shaky foundation of global growth and the cause of its collapseSunday 20 December 2009 19.05 EST Last modified on Saturday 9 January 2016 11.02 EST
It barely seems five minutes ago that policymakers were fretting about the possible – and, as it turned out, entirely illusory – effects of the millennium bug. Policy was loosened to prevent any deleterious effects from a global computer meltdown; the result was to pump even more air into the dotcom bubble.
Britain, hard though it now is to believe, was one country that avoided the recession which followed the realisation that most of the overhyped internet companies were duds. Gordon Brown had been stingy with public spending in the late 1990s, building up a sizeable fiscal war chest in the process. When the crisis broke, he was able to behave in a classic Keynesian way – boosting growth through higher investment and lower taxes.
These were the days of "prudence for a purpose", of "no return to Tory boom and bust" and of "building a platform of stability". With the economy likely to contract by 4.75% this year (a postwar record) and borrowing on course to hit 12%-13% of GDP this year (a peacetime record) it all seems a very long time ago.
George Osborne, understandably enough, is loving it. Brown made mincemeat of a succession of shadow chancellors, taunting them with the contrast between the strong growth and healthy public finances under Labour and the humiliation visited upon John Major's government on Black Wednesday.
There were none of the sterling crises that had marked every previous Labour administration. Nor could the Conservatives make their traditional accusation against Brown – that Labour governments, sooner or later, ran out of money.
There are no such constraints now. Osborne responded to Friday's news that the Treasury had to borrow more than £20bn last month to balance the books by accusing Brown of "maxing out on the nation's credit card". The looming fiscal squeeze does reflect the fact that Labour has run out of money.
It is, however, unfair to assume that Britain is alone in its budgetary difficulties. The UK's overreliance on financial services as a source of both growth and tax revenues means the deterioration in the public finances has been more marked here than elsewhere, and from a worse starting point. Brown, crucially, failed to replenish his war chest after the loosening of policy earlier this decade.
But the crisis of the past two and a half years has exposed vulnerabilities across the entire global economy. During the fat years in the middle of the decade, clear warning signs of trouble ahead were ignored. Ultimately, the global imbalances did matter. Ultimately, the build-up of personal debt did matter. Ultimately, the willingness of banks and other financial institutions to take ever bigger risks in search of high returns did matter.
The economics profession thought otherwise. It built sophisticated mathematical models showing that markets could not be wrong. Despite the fact that Wall Street and the City of London seemed to be dominated by headstrong young men with far too much money and far too little sense, the chance of a catastrophic blow-out was viewed as alarmist nonsense. When the meltdown occurred, there was a sense of utter disbelief. Chuck Prince, the (former) boss of Citigroup, captured the mood when he said, a couple of weeks before the crash, that while the music was playing he would carry on dancing. If prices in the markets were not signalling problems, how could there possibly be any?
The fact was, however, that trouble had been festering for the past 15 years, and intensified during the noughties. After the collapse of communism, industrial production migrated to Asia, and China in particular. Britain and the United States saw a hollowing out of manufacturing and a concomitant growth in the relative importance of their financial sectors. Producers in Asia (and parts of Europe such as Germany) ran trade surpluses while the Anglo-Saxon economies ran trade deficits. Surplus countries bought assets in debtor countries; the money churning through New York and London kept the dollar and the pound strong, made imports cheaper and allowed policymakers to keep interest rates low. Consumers found their incomes went further and they could borrow cheaply. They spent like it was going out of fashion.
Yet there was a dirty little secret about this supposed perpetual moneymaking machine. It required debt – and lots of it – to work. The real story of the noughties is that of how borrowing was used to plaster over the deep structural problems of modern global capitalism. We have almost reached the end of that road, but not quite.
Dhaval Joshi, the economist at RAB Capital, describes it well when he says that this has been the decade of three borrowing booms. It began with corporations racking up debt during the irrational exuberance of the dotcom bubble. Alan Greenspan dealt with the recession that followed by leaving interest rates low enough for long enough that there was then a boom in borrowing by households, leading to a housing bubble.
When that bubble burst, governments had a choice. They could ever sit and watch a severe recession worsen as companies and individuals repaired their finances by paying off their debts, or they could borrow more themselves. They took the second option, allowing budget deficits to take the strain as growth collapsed and unemployment rose. That was true in the west, but it is also true in the east. China, which perhaps has more to fear from recession-generated political unrest, is the world's top borrowing nation.
There are three big lessons, Joshi says. The first is that debt-driven growth is eventually unsustainable. To generate growth from borrowing, you have to borrow more year in, year out. The second is that borrowing binges lead to asset booms, which investors seek to rationalise using arguments such as "a new paradigm" or "a wall of money".The final lesson is that the point of maximum danger in any borrowing boom is when borrowing starts to slow, not when it stops. "However much you borrow and spend this year," Joshi says, "if it is less than last year, it means your spending will go into recession."
This is an important point given the current state of the global economy. Governments are coming under intense pressure to rein in their borrowing; some countries, Ireland most notably, have already taken steps to do so.
Policymakers are hoping a renewed appetite for debt by firms and households will enable governments to cut borrowing without causing a second leg to the recession. This looks like a flawed strategy. It would be rebuilding the global economy on the same jerry-built foundations that caused the crisis in the first place. It also flies in the face of reality: there is precious little evidence that the private sector has any great desire to load up with lots more debt.
Instead, governments may have to face up to a stark choice. They can carry on borrowing more, thereby accepting that public sector deficits will spiral. Or they can respond to the pressure from the financial markets and start borrowing less. The latter seems the likeliest, but it would all but guarantee a double-dip recession during 2010.
Rebuilding manufacturing in the US is something most US citizens want and it is not to be feared. The problems come when you have a DAVOS Switzerland global corporate tribunal envisioning a NEW WORLD ORDER that seeks to take a first world Europe and US down to the equivalent of third world Asian nations. That is the difference in rebuilding manufacturing locally with small business co-ops for example-----and allowing global pols to drop GLOBAL CORPORATE CAMPUSES that will make a US city look like those International Economic Zones in China----extreme wealth inequity, slave labor, and devastating environment damage. To Americans NEW WORLD ORDER means being moved back to colonial status being ruled by far-away rich and in service of global corporations having no rights, no US Constitution, no Rule of Law for all people.....just the rich doing whatever they want to move more wealth to themselves. There is no rebuilding the 'middle-class' with global pols----there is no rebuilding 'unions' with global pols. Women and people of color are always pushed to the lowest level in these economic models----but this global model has everyone in as human capital.
WE CAN REVERSE THIS EASY PEASY-----WE ARE SIMPLY RETURNING TO SOCIAL DEMOCRACY AND REBUILDING RULE OF LAW, US CONSTITUTIONAL RIGHTS, PUBLIC JUSTICE, AND ENDING MONOPOLY BY REBUILDING OUR LOCAL ECONOMIES WITH SMALL BUSINESSES AND SMALL MANUFACTURING FACTORIES.
'But over the past four decades a political model that both facilitated the spread of technology and provided some protection against its disruptive consequences has come under attack. Welfare states have become less generous, levels of long-term unemployment are much higher, taxation has become less progressive, politics has increasingly been dominated by those with the deepest pockets who can lobby the loudest.
Philip Jennings, general secretary of the global UNI union said: “We need some governance to ensure a democratic evolution and that requires public policy discussion. There is the opportunity to shape technology to improve people’s lives; through connectivity, education, health. We shouldn’t be fearful and fatalist about it.” '
Wall Street debt is fraud and we must reject all this debt created by Maryland Assembly and Baltimore City Hall-----it is not our debt. We can rebuild Baltimore without it.
Fourth Industrial Revolution brings promise and peril for humanity
Davos was a good forum for technology pioneers, business leaders and politicians to consider some of the implications of the new economy
Larry Elliott Economics editor
Sunday 24 January 2016 07.11 EST Last modified on Sunday 24 January 2016 17.00 EST
Until the spasm in the markets interfered, Davos 2016 was supposed to be about how humankind will cope in the new age of the smart machine. While share prices were gyrating, the bigger picture was obscured. There is a fourth industrial revolution happening and it is likely to be as profound in its effects as the previous three.
The first Industrial Revolution was about harnessing steam power so that muscle could be replaced by machines. The second was driven by electricity and a cluster of inventions from the late 19th century onwards – including the internal combustion engine, the aeroplane and moving pictures. A third revolution began in the 1960s and was based on digital technology, personal computing and the development of the internet. Industrial Revolution 4.0 will be shaped by a fresh wave of innovation in areas such as driverless cars, smart robotics, materials that are lighter and tougher, and a manufacturing process built around 3D printing.
Fourth industrial revolution set to benefit richest, UBS report says
A pity then that the World Economic Forum was overshadowed by falling share prices and the cost of oil because the impact of the fourth industrial revolution will be felt long after investors have stopped fretting about a hard landing in China.
Davos was, in some ways, a good forum for the gathering of technology pioneers, business leaders and politicians to consider some of the implications of what will be a very different sort of economy. Just to take one example, smart machines will soon be able to replace all sorts of workers, from accountants to delivery drivers and from estate agents to people handling routine motor insurance claims. On one estimate, 47% of US jobs are at risk from automation. This is Joseph Schumpeter’s “gales of creative destruction” with a vengeance.
There are three myths about Industrial Revolution 4.0. The first is that it won’t really have as big an impact as the previous periods of change, most especially the breakthroughs associated with the second industrial revolution. In the past, it has always taken time to feel the full effects of technological change and many of today’s advances are in their infancy. It is far too early to say that the car or air travel will prove to be less important than the sequencing of the human genome or synthetic biology.
The second myth is that the process will be trouble free provided everything is left to the market. It is a fantasy to believe that the wealth created by the fourth Industrial Revolution will cascade down from rich to poor, and that those displaced will just walk into another job that pays just as well.
Robot revolution: rise of 'thinking' machines could exacerbate inequality
Indeed, all the evidence so far is that the benefits of the coming change will be concentrated among a relatively small elite, thus exacerbating the current trend towards greater levels of inequality.
This was a point stressed by the Swiss bank UBS in a report launched in Davos. It notes that there will be a “polarisation of the labour force as low-skill jobs continue to be automated and this trend increasingly spreads to middle class jobs.”
A similar argument is made by Klaus Schwab, the man who runs Davos, in a book on the Fourth Industrial Revolution handed to each of the delegates at this year’s World Economic Forum.
Schwab compares Detroit in 1990 with Silicon Valley in 2014. In 1990 the three biggest companies in Detroit had a market capitalisation of $36bn (£25bn), revenues of $250bn and 1.2 million employees. In 2014, the three biggest companies in Silicon Valley had a considerably higher market capitalisation ($1.09tn) generated roughly the same revenues ($247bn) but with about 10 times fewer employees (137,000).
It is easier to make money today with fewer workers than it was a quarter of a century ago. Setting up and running a car company was an expensive business and required a lot of workers. A company that makes its money out of a smart app requires less capital, doesn’t have to pay for storage or transport in the way that car companies do and incurs virtually no extra costs as the number of users increases. In the jargon of economics, the marginal costs per unit of output tend towards zero and the returns to scale are high. This explains why tech entrepreneurs can get very rich very young.
Technological change has always been disruptive. There was a polarisation of income and wealth in the first wave of industrialisation at the beginning of the the 19th century, and this gave rise to political and institutional change over the 100 years between 1850 and 1950: the spread of democracy; the emergence of trade unions; progressive taxation and the development of social safety nets. These helped create bigger markets for the consumer goods that were spawned by the second Industrial Revolution: TVs, radios, vacuum cleaners and the like.
But over the past four decades a political model that both facilitated the spread of technology and provided some protection against its disruptive consequences has come under attack. Welfare states have become less generous, levels of long-term unemployment are much higher, taxation has become less progressive, politics has increasingly been dominated by those with the deepest pockets who can lobby the loudest.
Philip Jennings, general secretary of the global UNI union said: “We need some governance to ensure a democratic evolution and that requires public policy discussion. There is the opportunity to shape technology to improve people’s lives; through connectivity, education, health. We shouldn’t be fearful and fatalist about it.”
There is, though, a third and final myth: namely that all will be well provided the fruits of an economy dominated by artificial intelligence and smart robots can be redistributed, perhaps through a citizen’s income so that we can all have more leisure time when machines do all the work.
But redistribution, even assuming it happens, is only part of the story. Making his first visit to Davos, the Archbishop of Canterbury said the changes likely to be brought about required not just an economic but also a spiritual response. “This is not just about money, it is about what it is to be human”, said Justin Welby.
Schwab said: “The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril. My concern, however, is that decision makers are too often caught in traditional, linear (and non-disruptive) thinking or too absorbed by immediate concerns to think strategically about the forces of disruption and innovation shaping our future.”
He’s right, although there is a simpler way of putting it: faced with the challenge of disruptive new technology, the current political framework is no longer fit for purpose and its shortcomings are likely to lead to a backlash that could turn very nasty. That should concern not just Schwab and the Archbishop of Canterbury but also the investment bankers of Wall Street and the tech billionaires of Silicon Valley.
I think all Americans understand that most working age adults are not simply choosing not to work. Even seniors they constantly pin as the fall in these numbers overwhelmingly are placed in a position to continue to work. I shared how these participation numbers hide those wanting work by many Americans unemployed are being pushed into SS Disability and/or school and job training which makes it seem they are not looking for work. As well, most of the employment created since 2008 are part-time and temporary yet those are counted as employment. So, unemployment is REALLY around 35% with no where to go but up with this coming economic crash.
Republicans and Clinton neo-liberals tied us to this down slide in employment deliberately----and they do not intend to stop. Simply getting rid of these corporate pols will allow us to reverse this before it gets any worse. Young adults are coming out for Bernie because they know that dynamic. This is not about one person running for President---it is about changing political structure at all levels and Republican voters need to be aware-----your pols are lying to you as much as Clinton/Obama neo-liberals are posing progressive while operating as Republicans.
Wisconsin is no different than other states and below you see they hype their own state employment but their new jobs have looked like our new jobs----their citizens are being moved into job training and school to hide unemployment and I'm sure their SS Disability rates are climbing with all other states.
Study: U.S. Workforce Participation at Lowest Point Since 1977
Posted in News | By Matt Crumb | Posted October 7, 2014 11:33 AM
While U.S. labor force participation continues decline, Wisconsin's participation is better than most
October 7, 2014
By Matt Crumb
MacIver Institute Research Associate
The number of people in Wisconsin 16 years or older who are working or actively looking for work was 9th best in the country in 2013 at 68.6 percent. While Wisconsin's labor force participation rate remained unchanged from the previous year, the 68.6 percent figure is still a 15 year low.
The labor force participation rate is a number tracked nationally by the federal Bureau of Labor Statistics (BLS) and in Wisconsin by the State's Department of Workforce Development.
Labor force participation provides fuller context for America's employment situation than the standard unemployment rate because a higher participation rate shows greater confidence in the economy. The weakness of the traditional unemployment number is that it does not include those individuals who have stopped looking for a job altogether. If more people are entering the workforce it means more people believe they can find jobs, while a drop in the labor force usually means people have given up the search for work.
For the country as a whole, 2013's labor force participation rate of 62.7 percent was the lowest it has been since 1977, when Jimmy Carter was president. In the late 1990s and early 2000s, the labor force participation rate hovered just over 67 percent. The U.S. workforce then modestly declined to around 66 percent from 2002-2008. The recession had a dramatic impact on the participation rate starting in 2009 and the country's workforce has continued to decline since.
Only North Dakota and Washington, D.C. have seen their participation rates increase compared to 1999 levels. They are also the only two places to see participation rates recover to pre-recession levels (2008 and before).
The boom and bust brought by the Commodities Act minus Glass Steagall banking wall creates the temporary and part-time employment environment we have seen grow since the Tech bubble crash. All through Bush and Obama terms citizens are now likely hired to jobs that do not last long----do not follow with permanent hiring, and are most often part-time. The boom and bust of this Wall Street bubble cycle since Clinton has torn apart citizens' expectation of career with steadily growing salaries and that's the point. There is no rebuilding of middle-class with global corporate pols.
Temporary jobs on rise in shifting U.S. economyThe Associated Press 3:46 p.m. EDT May 24, 2014(Photo: Saul Loeb, AFP/Getty Images)
WASHINGTON — While the U.S. economy has improved since the Great Recession ended five years ago, part-time and "contract" workers are filling many of the new jobs.
Contract workers made up less than half of one percent of all U.S. employment in the 1980s but now account for 2.3%. Economists predict contract workers will play a larger role in the years ahead.
They are a diverse army of laborers, ranging from janitors, security officers, home-care and food service-workers to computer programmers, freelance photographers and illustrators. Many are involved in manufacturing. Many others are self-employed, working under contracts that lay out specific responsibilities and deadlines.
Labor leaders and many economists worry. Contract workers have less job security and don't contribute to the economy through spending as much as permanent, full-time workers. Nor do they have the same job protections. Few are union members.
"It is not hugely clear that we're coming into a temp-worker, contract-worker, contingent-worker nation. But it's something to keep an eye on," said Heidi Shierholz, an economist with the labor-oriented Economic Policy Institute. "There's definitely been an increase in the share of those working part time."
Part-time and contract jobs in the past tended to rise during recessions and recede during recoveries. But maybe no longer: Part-time workers have accounted for more than 10% of U.S. job growth in the years since the recession officially ended in June 2009. Meanwhile, union membership has been sliding steadily since the mid-1980s.
Businesses often hire contract workers or freelancers because it is less expensive than hiring full-time workers.
"Workers increasingly serve businesses that do not officially 'employ' the worker — a distinction that hampers organizing, erodes labor standards and dilutes accountability," said Catherine Ruckelshaus, general counsel for the National Employment Law Project, which advocates on behalf of low-wage workers.
Many business leaders have a different take.
"Some people don't want to be a full-time employee. They want contract work," said Bruce Josten, executive vice president of the U.S. Chamber of Commerce. Still, Josten recognizes some of them "are hoping the contract work will ultimately lead them into a full-time position."
A recent Federal Reserve study showed that nearly 7.5 million people who are working part time — contract workers included — would rather have full-time jobs.
Jerry Jasinowski, who served as president of the National Association of Manufacturers for 14 years and later as president of the Manufacturing Institute, said despite criticism leveled against contract workers from some quarters, "I think on balance, they are a positive reflection of the extent to which production has become much more flexible, a reflection of hybrid operations. Some people don't like it. But that's neither here nor there. That's where everybody's moving."
Analysts suggest the increase in contract and "temp" jobs will likely accelerate as more baby boomers retire from their full-time jobs.
Pressure from a company's shareholders — often focused on short-term returns — can also lead businesses to lower labor costs by reclassifying a portion of their payroll as part-timers or spinning them off to a contracting agency.
The online job site CareerBuilder.com, which specializes in "contract placement," cites research showing that 42% of employers intend to hire temporary or contract workers as part of their 2014 staffing strategy — a 14% increase over the past five years.
The issue got the spotlight when President Barack Obama in February unilaterally upped the minimum wage for federal contractors and their employees from $7.25 to $10.10 an hour, fulfilling a top demand by liberal lawmakers and groups. The higher rates kick in Jan. 1.
"America does not stand still, neither do I," Obama said. Aides said more than 2 million employees whose companies have federal contracts are affected. Obama's proposal to raise the minimum wage nationally by the same amount remains bogged down in Congress.
A recent Brookings Institution study labeled the first decade of the 21st century a "Lost Decade" for the labor market. For the first time since World War II, the U.S. economy did not have more payroll jobs at the end of a decade than at the beginning. And the shadow of the December 2007-June 2009 recession still looms over today's labor market.
'The Boom And Bust Of Malice
Creators.com Phil Lucas'
If Americans understand that from Reagan/Clinton to Bush/Obama the same Robber Barons that gave us the Great Depression by doing exactly what Wall Street and the FED are doing today-----you understand how your Congressional pols and a Clinton/Obama/Bush Wall Street global pol are taking the US. Unemployment in the US will be worse than the Great Depression after this coming crash if we allow them to control how it is handled. We need an FDR social Democratic approach to reverse this and get everyone back to work or we will see the NEW WORLD ORDER flooding US cities like Baltimore with immigrant labor while building global FOXCONN corporate campuses with our American society disappear to becoming one modeled after the Chinese----one global political party---autocratic and militaristic----extreme wealth and poverty and a right-wing corporate state.
Crime Bill-----NAFTA for global market------Welfare Reform----Commodities Act and breaking Glass Steagall---all in Clinton era all designed to bring the US to this NEW WORLD ORDER.
The Boom And Bust Of Malice
Creators.com Phil Lucas
Dracula's Castle came on the market last week.
At last, the perfect property has become available to relocate the Federal Reserve and Congress.
Thinking these pillars of power deserved further attention, some thoughtful readers forwarded these stories:
"BIS (Bank for International Settlements) warns of Great Depression dangers from credit spree."
"Credit crunch will 'shred investment portfolios to ribbons.'"
"Absolute Bond Contagion."
"Crack-up Boom, Part IV."
"The Crumbles of a Subprime Pie Crust."
These stories came from reasonable and sober journalists, analysts and economists. Being reasonable and sober, their work does not appear in the organs of the ruling elite: the networks, cable outfits and national newspapers.
You may think those headlines do not apply to you.
The Great Depression was engineered by the Federal Reserve. They can do it again. That first Great Depression followed the Roaring Twenties. Those twenties roared because the Fed pumped money and credit into the economy, creating asset bubbles, such as in stocks. Then the bubbles burst.
Sound familiar? Think stock market dot-com bust. Think housing bust.
Through purposeful inflation, the Fed has created every boom and bust since its creation in 1913, a date that will live in infamy.
Inflation strips dollars of buying power. In a system of persistent inflation, people do not save. The interest yields do not keep up with prices. In an attempt to protect their wealth, people swap paper dollars for assets, such as stocks, bonds, real estate or gold.
Inflation enriches Wall Street, which sells and finances assets. This is why the government is infested with former Wall Street honchos. They manage the inflation apparatus for the benefit of the Street, to which they return after their government gigs.
They pump massive infusions of money and credit into the economy, collecting commissions and fees on every dime.
Without an inflationary monetary system, Wall Street tycoons would have to sell their Picassos and downsize their castles.
Washington politicians would have to give up their chefs and find honest employment, such as flipping burgers, one of the job categories still in demand as a result of their management of the economy.
Needless to say, they love the Federal Reserve.
The headlines above reflect the consequences of its actions.
When gangsters commandeer a nation's political and banking systems, bad things happen. The criminal mind cannot control its lust, greed and gluttony.
When their boom turns to bust, as is happening now, the criminal class will refill their coffers with public money. They will declare an emergency, a threat to the nation, and bail themselves out by sticking buckets in the public's hands.
The headline "Absolute Bond Contagion" comes from Jim Willie. It refers to the mortgage fiasco eating through the entwined, interconnected bond market.
This affects your bank, insurance company, stock brokerage and pension fund. It affects the cost of debt, institutional and personal.
More than three years ago, Willie accurately forecast the present housing and bond disasters. Here is his current forecast:
— The (taxpayer) bailout will be at least $1 trillion and possibly much more among bondholders.
— The housing decline will wipe out all gains in national home values since 2001.
— All except one or two homebuilders will declare bankruptcy.
— USFed wants considerable destruction so as to consolidate the banks.
— USFed wants broad economic decline to usher in the North American Alliance.
In other words, not only is inflation deliberate, but the whole coming economic meltdown is deliberate.
Millions of homes lost, jobs vaporized, portfolios destroyed — all deliberate.
The Great Depression had a purpose. It transferred power. It ushered in the vast, intrusive government we have today.
What deliberate malice awaits us now?