This is a crisis
blog. I am writing this in the morning of Monday, August 24,
and in fact this is mostly about China, though only item
1 and item 2 are
directly concerned with it. There will no doubt be more about China -
and the economies of the rest of the world - in the coming days.
There are 5 items with 5 dotted links: Item 1 is
about a considerable collapse in China's economy, that is now being
followed by considerable troubles in the rest
of the (financial) world; item 2 is about a decent
explanation of the collapse and the troubles in The Guardian; item 3 is about an article by Robert Reich on having
to work all the time, and loosing all one's workers' benefits since one
now has been reclassified as an employer who rents out himself; item 4 is about the latest encyclical letter of the
pope, which indeed is special (though I am quite doubtful
it will succeed); and item 5 is about an item by
Bill Maher on greed, "sharing" and the economy: Now that most everyone
who is working in the USA is an employer who shares in all the costs,
it should be pointed out that the one thing the 90% does not
and will not get a share
in: the profits of the
firms who employ these "employers".
the Heck is Going on in the Global Markets?
article of today
is by Wolf Richter on Wolf Street:
This wasn’t supposed to
happen. The week was already on a crummy downhill path globally, and
emerging-market currencies were blowing up, when on Friday in China the
Caixin’s Purchasing Manager’s Index hit the worst level since March 2009; manufacturing is sinking deeper into the mire.
So the Shanghai stock
index plunged 4.3% for the day, and 11.5% for the week, to 3,508,
closing at the same level as the bottom of its July rout.
The entire machinery that
the Chinese government and the People’s Bank of China had set in motion
to bail out the markets during the July rout, which had worked for a
couple of weeks, has now proven to be useless. And the markets, thought
to be controllable by fiat or manipulation, suddenly regained a will of
Other Asian stock markets
plunged too: Hong Kong’s Hang Seng dropped 1.5% on Friday and 6.6% for
the week; it’s 5.1% in the hole for the year. The Nikkei fell 3% on
Friday and 5.3% for the week.
Europe was next. The
German Dax, the British FTSE 100, French CAC 40, the Spanish IBEX 35,
the Italian FTSE MIB, they all plunged about 3% for the day and lost
between 5% and 6.5% for the week, except for the German Dax which lost
nearly 8% for the week. It has now plummeted 18% since its dizzying
peak in early April. Easy come, easy go.
I say. There is considerably
more in the article, including several graphics, but the above
summarizes the central tendencies. Note that all major stock exchanges
lost around 1/20th (5%) of their total value - or more.
This starts with a subtitle
that I like because it seems quite true to me:
World hasn’t changed much
since financial crisis, which showed an economic model based on
widening inequality and uncontrolled capital flows is unviable
Note that -
implicitly, is also true - this is a strong criticism of Obama, who
indeed did nothing other than give the big banks even
after they fucked up in a very major way in 2008. ("Change, change!
This is the start of the article:
And so it begins. Shares
are falling, currency markets are in turmoil. The price of oil is going
through the floor, burning the fingers of speculators who have made the
wrong bets on borrowed money. Welcome to the crash of August 2015.
Financial markets being
what they are, there is every chance there will be a bounce on Monday.
Investors will be sniffing out bargains and be hoping that the scale of
last week’s falls will prompt a response from central banks. Even in
the most severe bear markets, prices never go down in a straight line.
But don’t be fooled. This could get ugly.
Fear rippled through
financial markets. Two questions were asked. Did the slowdown in China
mean that demand for global oil and metals would fall? And was China about to export deflation to the rest of
the world through a weaker currency? To which the answers were yes and
yes. Capital came flooding out of the emerging market countries seen as
particularly vulnerable, and their currencies fell.
Shares in Germany fell
because of the economy’s exposure to China. Shares in London fell
because the FTSE 100 is stuffed full of mining and commodity companies.
Shares on Wall Street fell because they were falling everywhere else
and because of concerns that the Federal Reserve is gearing up to raise
interest rates next month.
And there is this, that
outlines the background, I think quite correctly:
The economic story of the
US since the Great Recession ended has been of QE fuelling a six-year
bull market in shares at a time when economic growth has been weak and
productivity growth even weaker. There has been no trickle-down effect,
and no attempt to redress the main structural problem of the past three
decades: the severing of the link between productivity and wages. The
top 10% of US households took 116% of the income gains when the US
economy was recovering between 2009 and 2012. The other 90% of US
citizens saw their living standards fall. Inequality has widened.
And finally there is this on
the subject of the crisis (which - I repeat once more - did not
2009, and it didn't because the 90% saw their living standards fall):
The crisis of 2007-09 was
a lesson to policymakers that international policy cooperation was
needed to increase global demand. It was a lesson that there needed to
be higher investment in infrastructure and skills to raise
productivity. It was a lesson that an economic model based on widening
inequality was unviable. It was a lesson about the risks of
uncontrolled capital flows.
Clearly the lesson wasn’t
Yes, indeed. Also, as
long as effective power resides in the big banks and the big oil
companies, both of which are directly involved in the U.S.
there will not be "higher
investment in infrastructure and skills to raise productivity", at least not in the U.S.: most of
their manufacturing is not done in the U.S. any more, but in
China and other low wage countries. Therefore also there is little
demand in the U.S.
There also will be more
inequality. And the reason is in the end deregulation: there will continue
to be "uncontrolled
capital flows" because the rich have been deregulating - breaking down,
destroying - the laws that kept them somewhat well-behaved from 1946
It may now be
falling down, once again, in a major way. But I don't know yet, because
it is Monday morning as I write this.
As Labor Day looms, more
Americans than ever
don’t know how much they’ll be earning next week or even tomorrow.
This varied group
contractors, temporary workers, the self-employed, part-timers,
free agents. Most file 1099s rather than W2s, for tax purposes.
On demand and on call –
in the “share” economy, the “gig” economy, or, more prosaically,
the “irregular” economy – the result is the same: no predictable
earnings or hours.
biggest change in the American workforce in over a century, and it’s
at lightening speed. It’s estimated that in five years over 40
percent of the American labor force will have uncertain work; in a
decade, most of us.
Note this also happened in the
years of crisis and since 2009, that is: crisis for the 90%,
though not for the 1%: these profited enormously. (See yesterday's graphics.)
Incidentally, the issue is less the pay than the certainty:
The problem is workers
don’t know when they’ll
earn it. A downturn in demand, or sudden change in consumer needs, or a
personal injury or sickness, can make it impossible to pay the
So they have to take
whatever they can get, now: ride-shares
in mornings and evenings, temp jobs on weekdays, freelance projects on
weekends, Mechanical Turk or TaskRabbit tasks in between.
Which partly explains why
Americans are putting
in such long work hours – longer than in any other advanced economy.
Incidentally, this also
means that now (1) the workers are only paid for the work they
which is profitable for their employes, and also (2) shifts
most of the
employers' risks involved in employing a work force, to the
individuals that now make up the work force.
And then there is also this
quite major set of
It also renders
irrelevant many labor
protections such as the minimum wage, worker safety, family and medical
overtime – because there’s no clear “employer.”
And for the same reason
employer-financed insurance – Social Security, workers compensation,
benefits, and employer-provided health insurance under the Affordable
So they are effectively swindled
out of that as well:
Since now "everyone is an employer"
(working from $10 an hour till $250.000 an hour) the many poor have no
rights anymore to labor protections, because now they
are re-classified as employers (of themselves, selling
themselves for - say - $15 dollars to another employer, who makes
$100,000 an hour, and has millions available).
There is more in Robert Reich's article, though I don't think his
proposals for changing the situation have much of a chance of being
4. The Pope and the Planet
The next item is by
Bill McKibben on The New York Review of Books:
Actually, this is a
book review of the pope's encyclical letter "Laudato Si’:
On Care for
Our Common Home" and it is quite laudatory.
It so happens that I am an
atheist who comes from a long line of atheists (my mother's family
turned atheist in the 1850ies after being swindled out of their farm by
Catholic monks) and for that and other reasons I am not a big reader
Also, I don't know where Bill McKibben stands, religiously speaking.
But it seems the pope's encyclical letter is rather special.
there is this:
Since Francis first
announced plans for an encyclical on climate change, many have eagerly
awaited his words. And on those narrow grounds, Laudato Si’
does not disappoint. It does indeed accomplish all the things that the
extensive news coverage highlighted: insist that climate change is the
fault of man; call for rapid conversion of our economies from coal,
oil, and gas to renewable energy; and remind us that the first victims
of the environmental crisis are the poor.
But then there is considerably
more in the encyclical letter:
The power of
celebrity is the power to set the agenda, and his timing has been
impeccable. On those grounds alone, Laudato Si’ stands as one
of the most influential documents of recent times.
It is, therefore, remarkable
to actually read the whole document and realize that it is far more
important even than that. In fact, it is entirely different from what
the media reports might lead one to believe. Instead of a narrow and
focused contribution to the climate debate, it turns out to be nothing
less than a sweeping, radical, and highly persuasive critique of how we
inhabit this planet—an ecological critique, yes, but also a moral,
social, economic, and spiritual commentary.
I say - though I should add
that this does fall within Catholic tradition, although not
a very recent one. Compare - for example - distributism
(<- Wikipedia), which in fact starts as follows:
In the early 21st
century, some observers have speculated about Pope
Francis's exact position on distributism
because of his denouncement of unfettered capitalism as tyranny in his
84-page apostolic exhortation Evangelii gaudium:
Just as the
commandment 'Thou shalt not kill' sets a clear limit in order to
safeguard the value of human life, today we also have to say 'thou
shalt not' to an economy of exclusion and inequality. Such an economy
kills... A new tyranny is thus born, invisible and often virtual, which
unilaterally and relentlessly imposes its own laws and rules. To all
this we can add widespread corruption and self-serving tax evasion,
which has taken on worldwide dimensions. The thirst for power and
possessions knows no limits.
Indeed, that is
radical and is by the present pope (and I agree with
Here is some more from the
of the environment, he says, is just one sign of this “reductionism
which affects every aspect of human and social life.” And though “the
idea of promoting a different cultural paradigm… is nowadays
inconceivable,” the pope is determined to try exactly that, going
beyond “urgent and partial responses to the immediate problems of
pollution” to imagine a world where technology has been liberated to
serve the poor, the rest of creation, and indeed the rest of us who pay
our own price even amid our temporary prosperity. The present
ecological crisis is “one small sign of the ethical, cultural and
spiritual crisis of modernity,” he says, dangerous to the dignity of us
Yes indeed - and from my
point of view, three major signs of intellectual crisis (I avoid
"spiritual", but mostly agree) are:
(1) the disrespect that there is truth (from the
1970ies till the middle 1990ies the Dutch were taught in their
"everybody knows that truth does not exist" - which was a major and
sickening lie, but also was very widely accepted as gospel,
because then no one could be wrong or mistaken in any way) and
(2) the pushing of the profit principle as the only
by which to value
anything - a man, a corporation, a society: "Does it produce a -
short-term - monetary profit": if it does it is good; if it doesn't it
is bad (and out go science, culture, the arts, morality, moral
norms and solidarity with - e.g. - the poor), and
(3) the pushing of individual greed and egoism as if these were
positive moral values, whereas in fact they are major signs of moral
sickness, that also only help the rich.
Back to the article, which has this:
The pope is at his
most rigorous when he insists that we must prefer the common good to
individual advancement, for of course the world we currently inhabit
really began with Ronald Reagan’s and Margaret Thatcher’s insistence on
the opposite. (It was Thatcher who said, memorably, that “there’s no
such thing as society. There are individual men and women and there are
families,” and that’s that.) In particular, the pope insists that
“intergenerational solidarity is not optional, but rather a basic
question of justice, since the world we have received also belongs to
those who will follow us.”
Yes, I agree, as I
also agree this fondness for "individual advancement" was started, at
least in politics, by Thatcher and Reagan, and was a major lie
from the very start:
Clearly they knew
(or ought to have known) that "individual advancement" (1) is at
the cost of individual backwardness of - possibly very many
- others; (2) can only be an advance for a small
proportion of society (for historically most children fall
socio-economically in the same group as their parents, wiith
relatively few exceptions, and quite independently from whatever is
claimed by politicians); and (3) is based on greed and egoism,
which tend to be satisfied only for those who are already
rich, at the cost of those who are already poor.
But they lied, and
tricked the many with lies that served only the few. Here is the last
bit I will quote:
Those who speak, in the
pope’s words, the language of “nonchalant resignation or blind
confidence in technical solutions” no longer have a tenable case. What
he calls the “magical conception of the market” has not, ultimately,
done what Reagan promised; instead it has raised, for the first time,
the very real specter of wholesale planetary destruction, of change
that will be measured in geological time.
possible—probable, even—that the pope will lose this fight. He’s united
science and spirit, but that league still must do battle with money.
The week the encyclical was released, Congress approved, in bipartisan
fashion, fast-track trade legislation, a huge victory for the forces of
homogenization, technocracy, finance, and what the encyclical calls
Yes, I agree, indeed
also with the estimate that the pope will lose this fight,
and that in part because he is already an old man, who probably will
not be a pope much longer, and who also will probably be replaced by a
much more conservative pope.
Even so, he did write a decent and mostly correct encyclical letter, by
atheistic and scientific criterions.
Bill Maher, New York Times Op Ed on the “Post Greed is Good Economy”
The final item for
today is by Yves
Smith on Naked Capitalism:
This starts with a bit
by Bill Maher (whom I like, without agreeing with everythibg he says):
And indeed this is a
nice segment, especially towards the end. And Bill Maher
is right the Americans owe it largely to themselves. As Yves
It’s striking to
observe both how deeply the staff internalize the demands made of them.
Again and again in businesses settings, to greater and lesser degree,
employers are able to exploit deep-seated impulses to do one’s best for
one’s tribe, for one’s family on behalf of mere enterprises.
Intellectually, these workers know this relationship is transient, yet
they invest emotionally anyhow.
That is: They are being deceived
about "sharing", which in fact precisely does not work for
"mere enterprises", again for a reason Bill Maher
gave: While everything - well: all costs - are being shared by
the staff, the
one thing the staff doesnot and will not share
is the profits the firm makes.
They share in the pains, but do not share in the profits.