VirtualExile

You remind me of how we almost passed the Equal Rights Amendment when I was a kid — I was a vocal supporter, marching in favor of it at my Catholic school in 2nd or 3rd grade. But then by 6th or 7th grade the tide had turned, with many of my female classmates turning against the ERA because "it would mean women get drafted". I remember that single argument carrying the day in the classroom. At the time I didn't think to argue, "But we should get rid of the draft entirely for everybody," which is my current position.

Now it is standard for Republicans/conservatives to oppose the Equal Rights Amendment, so it ain't gonna happen anytime soon, but there was this brief period when it almost passed.

Nevertheless, gender roles have become a lot less rigid during my lifetime, and both federal law and Supreme Court precedent make it illegal to discriminate on the basis of sex and gender. Some would argue we no longer need an ERA under current law and precedent, but recent events show that laws and precedents can easily become undone.

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Regarding your take on history, I'd argue that so many of the equal rights movements that gained footing during the 20th Century are a result of the technological revolution in which physical labor became less important and contraception became widely available. Knowledge workers are the key to economic growth now, and knowledge workers can be recruited from any race, ethnicity, religion, or gender, so capitalism has needed to tamp down the old caste system and build upon it a new system of widespread literacy, fewer children, and educational testing --> using educational testing to find and recruit the most productive and innovative knowledge workers.

The imperative of economic growth has been pushing human societies to reorganize themselves in more productive ways for thousands of years ... I hope for a different sort of future in which we accept that technology is a great gift, but we no longer use it to grow either population or output, instead using it to live in harmony with the rest of the planet's species and its environment. Surely we've reached a point where technology's more-more-more doesn't make us happier or allow us to live longer?

Last year fewer than 2% of the cars sold in the US were electric.  There's been a lot of talk on the Left about switching over to electric cars, a lot of hype in the stock market about Tesla, and several strategic announcements by other car companies that by a certain future date (usually > 10 years from now) they'll fully switch over to electric cars.

Yet this reminds me of non-alcoholic beer, which has a similarly tiny market share, although without any of the hype.

And low-fat potato chips, holding another similarly tiny market share.

When are people actually going to buy electric cars?  If you've bought one, great, but you're still < 2%.

There are some practical problems with electric cars, compared to gasoline cars.  They are generally more expensive and manufactured with top-of-the-line options packages -- aimed at the upper end of the market.  They have limited range of a couple hundred miles (assuming you don't run the onboard HVAC, heating and cooling reduce range substantially).  Charging stations are definitely not as ubiquitous as gasoline stations.  And over time car batteries become less efficient, just like the batteries in your laptop computers, requiring an expensive replacement.

GM can say now it will go all-electric by 2035, but if its customers don't follow them, they'll definitely renege on that promise.  You can't abandon 98% of your customers if you want to avoid bankruptcy.

Economists on the Left, that is, the set of professional economists who allow Left-wing politics to control their conclusions, have been lining up on the opinion pages to denounce the warnings from the Right and the Center that all this COVID relief spending will spark higher inflation.

Their arguments don't have much in the way of economics behind them.  They're using a bag of rhetorical tricks instead.  Saying stuff like:

"This isn't the 1970s."  As though inflation could only ever happen during that decade, and now inflation can never happen again.

"Inflation expectations are currently low."  As though inflation could only ever happen when everybody expects it to.

"Inflation has been low for decades."  As though inflation has some sort of historical inertia.

"People warned of inflation during the last recession and it didn't happen."  As though warnings of inflation must always be wrong, because they were wrong last time.

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Right now we're pumping WW2 levels of stimulus into the economy, with trillions more on the way.  So the only relevant time period for comparison from the past is WW2.  And WW2 produced a bunch of inflation.  It didn't matter that the 1940s were not the 1970s.  It didn't matter that prior to the 1940s inflation expectations were low.  It didn't matter that the 1930s had been known for deflation instead of inflation.  What mattered is that the money supply and federal spending increased enormously during WW2 the same way they are increasing now.

The famous (or infamous) monetarist economist Milton Friedman proclaimed that inflation is always and everywhere a monetary phenomenon.  You print more money, you get more inflation.  He was wrong!  Because there's another important factor to inflation: the velocity of money.  If you print more money, but that money is spent more slowly, then you don't get inflation.  If you print less money, but that money is spent more quickly, then you don't get inflation.  But if you print more money, and that money is spent more quickly, then you get inflation.  That's what happened during the 1970s.  It's also what happened during the 1940s.

I don't know that we're going to get higher inflation during the 2020s, but the velocity of money has been held down by this pandemic, and will probably spring back as more people are vaccinated and we approach herd immunity.  The combination of faster spending and the WW2-size increase in the money supply could easily fuel inflation like we haven't seen since the 1970s.  This isn't "scaremongering" because I'm not scared of inflation and I don't think you should be either.  But I think people should be prepared for higher inflation, instead of thinking it can never happen again because "this isn't the 1970s."

And it's not just COVID relief.  After they pass this extra $1.9 trillion in COVID relief (on top of the $5 trillion or so while Trump was President), Democrats want to spend yet another $2 trillion on Biden's infrastructure plan.

I'm not saying we shouldn't spend trillions on COVID relief and infrastructure.  But I think people should be prepared for what can happen when we spend this kind of money.  Higher inflation, higher interest rates, and higher taxes.  I think we should be prepared to PAY for what we want, instead of thinking we can have all those trillions of dollars of spending without consequence.

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Right-wing economists say things like "tax cuts pay for themselves via higher economic growth" -- when they clearly don't.

Left-wing economists say things like "our spending plans will not result in higher inflation, higher interest rates, or higher taxes" -- when most of the time they do.

Centrist economists who study history and reality would say -- both tax cuts and higher spending typically result in higher inflation and higher interest rates; unless you balance the tax cuts with spending cuts, or balance the higher spending with higher taxes.  But we've had this unusual period over the past 20 years when interest rates and inflation have both been low in the US, even as federal deficits have ballooned.  This unusual period has resulted from an unprecedented global savings glut, as many previously "third world" countries have quickly caught up with the Industrial Age and then the Computer Age by following mercantilist trade policies, and as the Baby Boom that followed WW2 has resulted in a demographic bulge of upper-middle class people saving for retirement, and as the destruction of private sector labor unions has resulted in vaulting economic inequality.

But there are still limits to this global savings glut, it is yet possible for demand to exceed supply, and this current WW2-style federal spending and debt binge could yet turn the global savings glut into a global debt glut.

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There's a persistent lie about the 1970s, perhaps you've heard the lie: "stagflation".  It is often said about the 1970s that it was a period of both stagnant economic growth, and higher inflation: stagflation.  But this is not true, and never was.  Economic growth was high during the 1970s, higher than it has been during any decade since.  Yes, there was also higher inflation, but it's a lie to call it stagflation.  Livings standards increased during the 1970s, at a pace we haven't seen since.

We probably need a period of higher inflation, because it would mean we've kicked into a higher pace of economic growth -- a higher pace that is necessary if we are to transform our economy into a less-polluting, but higher-productivity 21st Century cornucopia.  If you want a Green New Deal, if you want Medicare for All, if you want free higher education, if you want better mass transit, better child care options, more affordable housing, then you need a dramatic transformation of this economy that replaces the global savings glut and speculative financial bubbles with productivity growth, social change, and technological evolution.  That means you also need higher inflation, higher interest rates, and higher taxes.

Instead of a world that is saving for retirement and then preparing for burial, we need a world that is investing in its youth and building a 21st Century infrastructure.  Instead of a world that obsesses about stock prices and real estate values, we need a world that obsesses about education, protecting the environment, and increasing productivity.  If inflation above 2% is part of this better world, I'm not going to be upset, and I don't think you should be either.

Back in 2009 I thought President Obama and the Democratic Congress, along with the Federal Reserve, had a once-in-a-Century chance to do what FDR did during the 1930s and move the US economy to a fundamentally higher plane of growth via trillions of dollars in new federal spending combined with near-zero interest rates.  Instead, Obama gave his team an arbitrary spending limit of "under a trillion dollars" and the Federal Reserve began paying banks not to lend out their reserves.  The result was a deeper recession than anybody had expected, and a slow-burn recovery that didn't truly bloom until after Obama was gone -- allowing Trump to take credit for the lowest unemployment in over 50 years.

Why didn't Democrats grab the prize in 2009?  Obama's personality turned out to be less than his campaign rhetoric implied.  His was a slow-but-steady hand on the economic rudder, and he turned out to be more interested in making grand deficit-cutting deals with Republicans than growing the economy.  It was a historic missed opportunity.

As for the Federal Reserve governors, they had fallen under the spell of having an inflation target of under 2%.  This target came out of nowhere -- it was not mandated by the organizing statute of the Federal Reserve, which instructs the Fed to balance unemployment, inflation, and long-term interest rates.  It was not suggested by academic research, which correctly predicted such a low inflation target would increase financial and economic instability -- giving us the worst two recessions since FDR abandoned the gold standard in the 1930s.  Obama did nothing to change this ideology -- instead he renominated Ben Bernanke, who made this 2% target official Fed policy.

On the other hand, Obama's restraint did result in the longest economic expansion in US history, only ending when the COVID-19 pandemic resulted in widespread lockdowns during the spring of 2020.  Slow and steady.  But the "what if" factor haunts his legacy.  Most of the people who worked in the White House during his first term, and most Congressional Democrats from back then, ended up thinking they hadn't done enough to fix the economy.  They were too timid, they focused too much of their too-small stimulus on tax cuts instead of spending, they focused too much of their federal aid on banks instead of people.  They focused too much on a complicated and incomplete ObamaCare and not enough on fixing the overall economy.

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You cannot blame either Trump or Biden for making the same mistake this time around.  As I've written before, the federal government has engaged in WW2-size fiscal and monetary stimulus and is preparing to continue dumping additional trillions of federal spending into the US economy.

But the stimulus has been horribly designed.  Lots and lots of federal stimulus, yes, but 2/3 of it has ended up in the savings accounts of people who didn't need it.  Hundreds of billions given to business owners to pay their bills, hundreds of billions sent out as rebates to taxpayers, regardless of need.  If your business was doing fine, you still got aid.  If you were able to keep your job, you still got aid.  Most of the aid was in the form of "income support" -- cash transfers to people and businesses to keep them afloat, whether they needed it or not.  Expanded unemployment benefits for those who did lose their jobs -- in addition to the IRS rebates -- often boosted people's income above what they had been making when they were employed -- and a lot of people wisely put these extra payments into their savings accounts.

I'm not saying nobody needed help, but the aid wasn't targeted toward people who needed help.  So 2/3 of it ended up in people's savings accounts.

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Some "centrist" Democrats and Republicans are warning that an additional $1.9 trillion of federal stimulus could end up doing more harm than good.  They're rightly pointing out that most of the stimulus we've already spent ended up in people's savings accounts.  They're rightly pointing out that we've run up our debt to WW2 levels.  They're rightly pointing out that we're doing nothing to pay for this extra stimulus, and that the result after the lockdowns end could be inflation, higher interest rates, and then another recession.

WW2 levels of stimulus, during WW2, did result in a decade of higher inflation, averaging over 5%/year and occasionally hitting double-digits.  I have plenty of reason to think that our COVID stimulus will result in the same.  Now, I'm not afraid of some moderate inflation, I think overall it can be good for the economy to break out of the Fed's 2% inflation cap.  But after three decades of inflation never reaching 4%, and with financial markets having built-in long-term inflation expectations of under 2%, there will be unexpected repercussions from higher inflation.

And if the Fed decides to fight this higher inflation, we're going to be in for a rough ride, because the only way the Fed can fight inflation is to force the economy into recession, sometimes repeatedly, sometimes with interest rates well above 10%.

Congress also has a role in fighting inflation -- if Congress wants to.  The way Congress can fight inflation is by increasing taxes and cutting spending.  So if we start seeing the highest inflation of the 21st Century as our economy recovers from the pandemic, we could see the Federal Reserve react with much higher interest rates, and Congress react by increasing tax rates and cutting spending.

It's stuff we're not used to, stuff many people will never have seen before.  We're so used to low inflation and low interest rates.  But there's another mode to economics, the mode in which the velocity of a currency increases as people no longer look to it as a store of value, as people no longer hoard a currency instead of spending it.

When the global savings glut turns into a global spending frenzy.

On the one hand, we'll have stronger economic growth than we've seen in decades.  But the economy will not look familiar anymore, there will be different winners and losers.  People who counted on the US Dollar as a store of value, people who counted on low interest rates, people who counted on high stock valuations -- they'll be losers.  People who are able to produce high-value consumable goods and services will be winners.  The finance economy, which makes up 20% of US GDP, will be losers.  Those who sell durable goods and services on credit, will be losers --> houses, cars, educational degrees.  Retired people with lots of savings will be losers.  Younger people with marketable skills and/or lots of debt will be winners.

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But this vision of the next 10 years isn't so much about Biden's stimulus plan.  It's about the stimulus we've already done.  We've already baked in WW2 levels of stimulus, deficits, and debt.  So we're already likely to get the aftermath of WW2 -- higher inflation.  We could get a bit less of the coming disruption -- if Biden's stimulus plan focused more on needy people and less on aid to people who don't need it.

I could definitely be wrong about the future.  We'll see what happens next when it happens.

The real heist [of this Pandemic Recession] was not GameStop, or American Airlines, or any other single stock going up. It was, rather, that all stocks went up, and thereby hustled trillions of dollars into the higher income brackets in the process.

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I've made about 5% on my bet that long-term interest rates would go up.  I'd shorted long-term bonds, and their prices have declined, because long-term interest rates have started moving up.  I mean, long-term interest rates had nowhere else to move but up, they were the lowest they'd ever been.

Yet, I've been thinking stock prices have nowhere else to move but down, and I've consistently been wrong for months.  Again, it's the only trade I've lost money on.  Although stock prices are historically high, they aren't the highest ever, the highest ever in the US was 1999-2000.

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The S&P 500 returned 18% last year, while GDP declined 3.5%, the largest decline in GDP since the 1930s.  I was wondering, is this normal, for stock prices to increase while GDP falls?

In 2009, GDP fell 2.5%, but the S&P returned 26%.  Oh ...

In 1982, GDP fell 1.8%, but the S&P returned 22%.  Oh ...

So it is normal for stocks to climb when GDP falls by > 1%.  Oh ... the reason this was the only trade I lost money on, was that I failed to look at history.  Instead, I was trying to think rationally about an irrational stock market.  I thought -- prices are overvalued, and we're in the middle of a pandemic recession, so of course prices should fall.  Nope.

Why the hell don't stock prices fall during bad recessions???

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When do stock prices fall then, if they don't fall during bad recessions?

The last big fall in the S&P was in 2008, down 37% for the year.  Anything special about that year?  There was a massive banking crisis that caused a massive liquidity crisis.  GDP was flat for the year, technically in a mild recession.  Interest rates declined quickly.

Previously, stock prices fell for three years in a row, 2000-2002.  GDP was up each of those three years.  But interest rates declined quickly during that three year period.

Before that, we just didn't see stock prices fall > 10%, not for decades, you have to go back to 1973-1974 to find another bear market.  GDP did fall 0.5% in 1974 after booming in 1973.  Interest rates were very high.  This was the OPEC recession, when the US lost control of oil prices, because the US hit Peak Oil production and had to rely on imports for the first time.  Oil prices nearly tripled.

Wait ... oil prices nearly tripled right before the 2000-2002 bear market.

And oil prices nearly tripled right before the 2008 bear market.

So what do these bear markets all have in common?

Oil prices were skyrocketing, the Federal Reserve responded by pushing up interest rates, and then the financial markets ---broke.  Those were your last three major bear markets in the US.

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Sure, a Pandemic Recession is an outlier, something none of us have lived through before.  And we did have a sharp decline in stocks last March when Quarantine began.  But then the Federal Reserve dumped $5 trillion in new cash into the financial markets, and the US Congress spent an additional $4 trillion, and the stock market quickly recovered to hit new highs.

This was the only recession of my lifetime that wasn't intentionally caused by the Federal Reserve.  It was instead an accidental recession.  I expected a bear market to result, but one that lasted longer, the stock market collapsed overnight and then recovered overnight, hardly giving me a chance to reposition my retirement account to take advantage of the lower prices.  And now the stock market is firmly in Bubble Territory.

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So now I'm thinking, after looking at history, what's going to kill this stock market bubble will be a combination of higher oil prices and higher interest rates.

Right now oil prices are sort of back to normal in the $50s after they plunged to zero at the beginning of Quarantine.  And this return to normal hasn't spooked the Federal Reserve at all, overnight interest rates are still the lowest ever, 0.1%.  Long-term interest rates are creeping up, now that commodity prices have returned to normal, because the bond market expects the Fed will eventually begin increasing overnight rates, maybe 18-24 months from now.

History is often a poor guide to the stock market.  But one thing I've learned about bubbles is that they can continue for years after I've identified them.  So here's my history-infused scenario for what lies ahead:

The vaccination campaigns in the rich countries gather steam during 2021, achieving herd immunity by the end of the year.  The economy grows during 2021 across all the major rich countries.  The trillions of dollars, euros, pounds, and yen locked in people's savings accounts because they've got nowhere to spend it begins to flow.  Employment increases, but prices increase even faster.

We begin to see inflation hit levels rarely seen over the past thirty years -- over 4% inflation.  At first everybody shrugs it off, because demand is returning to normal after Quarantine.  But the price increases are not temporary, they continue.  Oil prices climb, as do electricity prices and other key commodities.  After a couple years, we're looking at oil over $100 again, and if you thought speculation was getting out of hand in 2021, wait until you see 2022 and 2023.  Everybody is bidding up prices of everything to levels never seen before.

Reluctantly, the Federal Reserve has to start increasing interest rates.  But it waited too long, now it is behind the curve, inflation is hitting 5%, then 6%, and the speculation in everything gets worse than the dot.com bubble, worse than the housing bubble, now the Fed has to start slamming on the brakes with large and frequent increases in interest rates.  The bond market crumbles, nobody in their right mind would lend money at current rates when rates are going up again next week.

Then, finally, BAM, the bubbles pop.

So, yeah, stock prices could go up another 50% from here over the next couple years.  Commodity prices could double or triple.  Bonds will crash.  Who the fuck knows what happens with BitCoin.  And then the Fed will finally call the cops and raid the party.  Probably before the end of Biden's first term.  He'll end up being "another Jimmy Carter" who presided over large deficits, increasing inflation, and increasing interest rates.

And in 2024 I'll be telling everybody I know to register as a Republican to vote against Trump in the Republican primary, as the only way we'll be able to save our democracy from the Trump Restoration.

To understand the magnitude of the current stock market bubble, as fed by the larger chunk of GDP taken by corporate profits, if profits were to return to the share of the economy they had in 1981, and if stock prices returned to the multiple of profits they had in 1981, stock prices would immediately fall by 83%.

I don't mean, if the economy went back to 1981 -- if the economy went back to 1981 stock prices would fall 99%.  I mean if the economic growth since 1981 were shared with the working class today the same way GDP was shared with the working class in 1981, stock prices would fall by 83%.

So, about 5/6 of stock market wealth today represents paying workers less and valuing profits more.  In other words, the ownership class has about 6x the wealth they'd have if we shared with workers as we did in 1981.

That's a lot of wealth to keep away from those pesky workers.  No wonder rich people spent $14 billion on the recent US election cycle.  A small price to pay to keep an extra $30 trillion in stock market value away from workers.  And it didn't matter whether Trump or Biden won, neither of them was going to take us back to 1981's ratios.  Back then federal income tax rates on the rich were 70%, compared to 37% now.  Corporate income tax rates were 46% then, compared to 21% now.  Biden never proposed doubling income tax rates back to 1981 levels.  Biden proposed increasing taxes on the rich to 39.6%, and taxes on corporations to 28%.  And with the Senate in Republican hands, Biden's proposals will go nowhere, even if he actually makes them, even if they weren't campaign bullshit.

If you invest in stocks, whether for retirement or some other reason, you're basically counting on conditions for workers to continue getting worse.  If you thought conditions for workers would get better, you'd bail out of stocks immediately.  But I don't think stock market investors typically think about it this way.  A lot of people invest in stocks because they've been told stocks are a great investment.  They look at how stocks are up 7,000% over 40 years, a compounding average of 11% per year, and think THIS IS GREAT, HOW DO I GET ME SOME OF THAT!  Well, most of that is from keeping workers' wages flat and grabbing their increasing productivity for yourself.

If workers had been given their fair share, stock prices would still have increased by 6% per year over the past 40 years.  That's not bad with compounding, stocks would've still gone up over 1,000%.  But capitalists are greedy, they want 11% per year, and they've gotten that 11% by keeping workers down and taking a larger share of the output for themselves.

So far GDP is still growing this quarter, though at a more reasonable 3.5% rate -- looks like recession is already over, which may be why Trump outperformed the polls and why down-ticket Republicans outperformed Trump.

Congress will return later this month to squabble over the budget and COVID relief.

And I bet everybody spends a billion dollars on the Georgia runoffs ...

This bit about Republicans being better for the economy --

The last five recessions, including the one we're experiencing right now, all began during Republican administrations!

There has not been a Democratic recession since 1980! That was six recessions ago.

I'm not making this up, these are the official recession start dates:

https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions

Wait, it's even worse, keep going back in time, 10 of the past 11 recessions began during Republican administrations!

Ugh, "better for the economy" my ass.  Better for rich people, they mean.

In some ways, control of the Senate is more important than control of the White House.  Trump would not be able to replace RBG with a conservative Justice if Republicans didn't control the Senate.  It was the Republican Senate that blocked Obama from replacing Scalia with a moderate Justice, holding that seat open for Trump's conservative nominee.

And now, with most of the federal aid for the Pandemic Recession having expired, it is the Republican Senate that is being cheap, proposing only $500 billion in more aid, whereas the Democratic House proposed $3 trillion and the Trump White House is proposing $2 trillion.  If you're watching your favorite restaurants and other venues close down permanently -- blame the Republican Senate.  If you or somebody you know has been laid off and is wondering how to pay the bills, blame the Republican Senate.

But blaming the Republican Senate won't do you much good, because of the Constitutional design of the Senate.

The Senate is the least democratic of the three institutions (Presidency, House, Senate) because each state gets two Senators and only two Senators regardless of population.  These Senators serve for six years at a time, insulating 2/3 of them from election year pressures.  This was the intentional design of the Constitution, of course, for the Senate to be the least democratic of the three institutions, but this design persists over 200 years later, even though California has nearly 70x the population of Wyoming.  California should have 140 Senators to Wyoming's 2.  But it doesn't, of course.

Republican Senators have been bought off with copious aid to farmers, but how many of you are farmers?  1% of you are farmers.  Otherwise, they don't give a damn about the rest of the economy.  Well, they give a $500 billion damn, but not the $2-3 trillion of a damn that the rest of us think is necessary.

That's the Constitutional Republic we live in.  Wyoming has the equivalent of 140 Senators.  That's why your family is waiting in a miles-long line to pick up groceries from a local food bank, wondering how you're going to avoid eviction when the federal eviction ban expires on December 31, as another 800,000 people are laid off each week.

It's why I keep saying the only practical solution is for more Democrats to move to Wyoming.  I don't know how else to fix this country without an unconstitutional center-left coup.  I really don't.