Thursday, October 13, 2016

My Thoughts On What I Deem Is A Serious Matter - America's Paltry Economic Recovery and Why.

Hanson on America and its values. (See 1 below.)
More on a  potential FBI revolt and disgust regarding Comey's actions.
Since the mass media have run off again chasing Trump chasing women, I thought it might be useful to talk about something more important - America's economic prospects which, in my opinion, remain bleak and could get bleaker when and if Hillary wins because her proposals are simply a continuation of Obama's.

I am posting an article pertaining to the failure of technology to employ at levels the "experts" thought would happen.(See 2 below.)
Nothing I am about to write is new but, when our attention is taken off the ball, I believe we need to focus on what matters.
 I will enumerate, in no particular order, most of the factors I believe have caused our paltry recovery.
 a) I submit you can attribute the inverse relationship of government growth to our diminished recovery.  Our current government produces nothing but misery and higher costs and the amount of GDP devoted to support massive government drains capital and saps energy and incentive from the private sector.
 b) The Fed's response has been another contributing factor. In its desire to arrest the decline produced by the recent depression they pumped money into the economy and, like when Greenspan overstayed manipulating interest rates, this Fed has overstayed reducing interest rates by keeping them at zero.
 Politicians and government agencies forced banks to make home loans that went sour because many borrowers were unsuitable risks.  Wall Street took advantage of Greenspan's policies and created bundles of mortgages that were comprised of a mixture of quality and when the economy slowed all hell broke loose.  As politicians are prone to do, they always look to deflect their involvement in order to engage in blame shift.
 Dodd-Frank was Congress' solution to the problem they helped create and it has done more to cripple our economy than any piece of legislation passed in several decades along with the ending of Glass Steagall.
 When Banks no longer earn their cost of capital their ability to make loans is impacted and when our growing number of retirees are unable to earn a decent return on their savings, using  conservative vehicles, they have no recourse but to cut back on consumption. Increased demand is what drives capital formation and corporate expansion.
 c) An insane person and/or a Rube Goldberg could not have designed a more complex and restrictive tax code.  The amoebic growth of special interest exceptions is outrageous.  Our tax code penalizes domestic expansion and is designed to support an Olympic sized government which, in turn, is grossly wasteful. 
 The Founding Fathers crafted our Republic so it would serve the public.  It has been re-designed by the political class and turned into a benefit dispenser in order to build loyal special interest voter groups for insuring their re-election. The total disregard of budgetary concerns and our mounting and crippling deficits would cause any fiduciary a deserved prison sentence. Politicians remain unembarrassed and worse, unapologetic. Why?  Because it is easier to spend other people's money than take the risk of goring bloated oxen.
 d) Government agencies have been allowed to operate without regard to Congressional authorization and their rules and regulations have strangled productivity, causing the private sector to depart America taking employment with them.
 Just recently the actions of  a Consumer Agency,  Obama created to protect consumers, were deemed unconstitutional.  Obama established this Agency to spread government control over our freedoms and ability to spend as we chose. He did so under the specious cover of consumer protection.
 e) Rising wages on a work force that is already competitively overpriced and under trained is a certain economic death sentence. There was a time when unions served a legitimate purpose.  Today they exist to perpetuate the outrageous salaries and power of their bosses who spend union dues to re-elect politicians who owe their lives to union support and who, in turn, pass laws favorable to unions but detrimental to our economy and, in the long run, American employment.
 f) A poorly educated workforce , in a technological age, cannot cope.
 g) I could list a host of other contributory factors but I will end by stating I believe what happens in D.C has a huge, if not controlling,  impact on what happens on the floor of the NYSE.  The stock market has recovered because The Fed flooded the market with money which, in turn, reduced interest rates and brought bond returns to zip causing a riskier investment environment.
 That said, a more subtle reason relates to mood and this relates to leadership. Obama's leadership has caused Americans to be dispirited., A majority believe we are heading in the wrong direction and statistics confirm this view. Furthermore, Obama's reliance upon Alinsky's model and the use of wedge issues has created a climate of discord  and fear. Something is rotten and not in Denmark.
 Economies do not perform well when there is wide distrust in government, corrupt  leadership and the prospects of new leadership is questionable if not downright depressing.
 Meanwhile, mass media is having a field day uncovering women who claim to have been indecently approached by Trump .  They are coming out of the wood work and some charges go back over 30 years.
 The 2016 campaign is turning into a race to the bottom, as I always knew it would, because when you go up against the Clinton's you either wind up committing suicide by shooting yourself in the back of your head or have your reputation ruined with a profusion of late allegations from sources virtually impossible to refute. They are masters at projecting their misdeed upon their opponents.
 If America chooses Hillary because of their distaste of Trump, I believe the next four years will be as, if not more, contentious as the 8 Obama years.
 If America chooses Trump, we will be on a roller coaster and he will address our issues in a highly unorthodox manner and probably make progress and the economy will do better.
 Because we are basically bankrupt, militarily weakened while the challenges are mounting, I suspect whomever is selected will find it tough to make much progress in any event.
 Though I was born a pessimist, and you can discount my views, history has proven me more right than wrong. 
 Man is and will always be imperfect and all that happens begins with and/or is shaped by that sad truth.

Off to Pittsburgh, returning late Monday. Have a non-hurricane weekend.

1) Medieval America

Victor Davis Hanson

By Victor Davis Hanson

Pessimists often compare today's troubled America to a tottering late Rome or an insolvent and descending British Empire. But medieval Europe (roughly the years 500 to 1450) is the more apt comparison.

The medieval world was a nearly 1,000-year period of spectacular, if haphazard, human achievement -- along with endemic insecurity, superstition and two, rather than three, classes.

The great medieval universities -- at Bologna, Paris and Oxford -- continued to make strides in science. They were not unlike the medical and engineering schools at Harvard and Stanford. But they were not centers of free thinking.

Instead, medieval speech codes were designed to ensure that no one questioned the authority of church doctrine. Culturally or politically incorrect literature of the classical past, from Aristophanes to Petronius, was censored as either subversive or hurtful.
Career-wise, it was suicidal for, say, a medieval professor of science at the University of Padua to doubt the orthodoxy that the sun revolved around the earth.

Similarly, at Berkeley or Princeton, few now dare to commit the heresy of expressing uncertainty about whether man-caused global warming poses an immediate, existential threat to human civilization.

Today, a fifth of American households have zero or negative net worth. The shrinking middle classes struggle to service trillions of dollars in consumer and student debt to big banks -- in the manner of medieval peasants.

In the medieval world, impoverished serfs pledged loyalty to barons in exchange for their food and housing on the manor. In the modern world, progressive government is the bastion that distributes entitlements on the expectation that the masses show their political fealty at election time.

In medieval Europe, widespread literacy disappeared. Superstition reigned in place of reason.

Despite spending some $11,000 per student each year, are we all that much different? In many polls, more than a quarter of Americans believe in astrology. A quarter think aliens have visited Earth. More than 40 percent can't name their own vice president. Nearly three-quarters of Americans have no idea what the Cold War was about.

The ruling cliques of the medieval court were full of insider knaves and scoundrels, plots and intrigue. Compare the current scandals, lies and hypocrisies of our Beltway cloister in Washington.

Closeted scholiasts wrote esoteric treatises that no one read. These works were sort of like the incomprehensible "theory" articles of university humanities professors who are up for tenure.

To talk to the masses, the Latin-speaking elite spoke localized slang that would centuries later become English, French and German -- the medieval version of our electronic grunts and made-up words on Twitter and email that are forming a new popular language.

Medieval Europe was fragmented into local and warring fiefdoms. Tribalism trumped state unity -- not unlike America's descent into separate red-state and blue-state cultures and identity politics.

With ancient borders long forgotten, medieval elites relied on massive walls, moats and keeps to stay safe -- sort of similar to what we see with the present-day gated estates of Malibu and Silicon Valley.
2)Fox News: Decision to Not Prosecute Hillary Left FBI, DOJ Disgusted

FBI Director James Comey's recommendation that former Secretary of State Hillary Clinton not be prosecuted for using a private email server did not sit well with lower ranking members of the agency or at the Justice Department, Fox News reports an anonymous source involved in the case said.

Comey's decision was not an unanimous decision, the source said, adding, "It was unanimous that we all wanted her [Clinton's] security clearance yanked."

"It is well known that the FBI agents on the ground, the human beings who did the investigative work, had built an extremely strong case against Hillary Clinton and were furious when the case did not move forward," Fox News judicial analyst Andrew Napolitano said. "They believe the decision not to prosecute came from The White House."

Comey on July 5 announced his agency would not recommend prosecution, though his description of Clinton's actions led critics to believe he should have. Comey testified to Congress that the governing statute requires intent, and that his investigation was unable to prove intent.
"Basically, James Comey hijacked the DOJ’s role by saying 'no reasonable prosecutor would bring this case,'" the FBI source said. "The FBI does not decide who to prosecute and when, that is the sole province of a prosecutor – that never happens."

America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs

By Jon Hilsenrath and Bob Davis

The technology revolution has delivered Google searches, Facebook friends, iPhone apps, Twitter rants and shopping for almost anything on Amazon, all in the past decade and a half.

What it hasn’t delivered are many jobs. Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012.
Hiring in the computer and chip sectors dove after companies shifted hardware production outside the U.S., and the newest tech giants needed relatively few workers. The number of technology startups fizzled. Growth in productivity and wages slowed, and income inequality rose as machines replaced routine, low- and middle-income, human-powered work.

Technology Booms, But Not For American Workers

After rising in the 1990s, employment at computer and electronic firms has fallen by more than 40%, though a smaller number of jobs has been created in other tech sectors.

Note: Publishing figures are through August; manufacturing figures are through September.
Source: Labor Department
This outcome is a far cry from what many political leaders, tech entrepreneurs and economists predicted about a generation ago. In 2000, President Bill Clinton said in his last State of the Union address: “America will lead the world toward shared peace and prosperity and the far frontiers of science and technology.” His economic team trumpeted “the ferment of rapid technological change” as one of the U.S. economy’s “principal engines” of growth.
The gap between what the tech boom promised and then delivered is another source of the rumbling national discontent that powered the rise this year of political outsiders Donald Trump and Bernie Sanders.
The tech-powered disappointment is subtler than the anger caused by thecrushing impact of China’s import invasion and the perceived failures of government institutions like the Federal Reserve in guiding the economy. Instead, it stems from the idea that Americans expected larger economic gains from these amazing new machines and the companies that created them, not a widening between the haves and have-nots.
“There is a growing sense of frustration that people haven’t seen the progress that their parents and grandparents did,” says Erik Brynjolfsson, a Massachusetts Institute of Technology economist whose work has chronicled how technology widens the income gap between rich and poor. “That frustration spills into the political arena.”
In 1997, Time magazine named computer-chip maker Intel Corp. ’s chief executive, Andrew S. Grove, who died in March 2016, as “Man of the Year.” Inc. CEO Jeff Bezos won in 1999. Companies spent billions of dollars reprogramming their computers for the Year 2000 bug, and profitless dot-com startups won giant valuations from optimistic investors.
The bursting of the dot-com bubble in early 2000, the recession in 2001 and deepening globalization proved to be turning points for the tech economy and its broader impact on American prosperity.
U.S. tech companies accelerated the reshuffling of their supply networks to China and elsewhere in Asia, places filled with growth potential and cheap labor. Hardware makers concentrated production overseas to supply U.S. and foreign computer makers.

Apple made early iMac computers in California but then shifted most of the company's production to outside the U.S., including assemblers in China. PHOTOS: HULTON ARCHIVE/GETTY IMAGES; THOMAS LEE/BLOOMBERG NEWS
After rising through the 1990s, total employment at computer and electronic firms in the U.S. sank to 1.03 million in August 2016 from 1.87 million in 2001, according to Labor Department statistics. Employment at semiconductor makers fell by half to 359,000 in the same period.
In the 1990s, Micron Technology Inc. was a successful example of how far the tech industry reached beyond its nexus in Silicon Valley. Based in Boise, Idaho, Micron was founded by Idaho farmers and businessmen, including the late billionaire J.R. Simplot, who supplied McDonald’s Corp. with most of its frozen french fries and had “MR SPUD” license plates on his pickup truck.
Micron’s workforce quadrupled to 18,800 between 1994 and 2000, with the growth overwhelmingly in the U.S. The company fought with Japan in the 1980s to restrict imported memory chips and protect its U.S. base.
These days, Micron is a case study in how technology companies have exported jobs to other countries. As of 2013, the most recently disclosed data, Micron had 11,300 workers in the U.S., down from 14,000 in 2000. The company’s non-U.S. workforce surged to 19,600, mainly in China and other Asian nations, from 4,800.
Securities filings show that the percentage of employees at Micron who were in the U.S. shrank to 37% from 74% in the same period. The company stopped disclosing the annual percentage in 2014. A Micron spokesman says much of the growth outside the U.S. came from acquisitions.
“What we’re doing is replacing more resources there to support the growing customer base—both the multinationals that are leveraging the low labor-cost areas in China, in particular, as well as the indigenous Chinese manufacturers,” Mike Sadler, Micron’s head of sales, told analysts in 2004. He is now Micron’s strategic chief.
The Semiconductor Industry Association says semiconductors remain a big U.S. business and are America’s third-largest export, trailing cars and aircraft.

Superstar Tech Companies Create Fewer Jobs

Few technology companies are doing initial public offerings, which can help spawn more jobs as those companies grow. And companies that went public in the five years before the dot-com bubble burst in 2000 have more employees overall than those with IPOs since then.

Sources: Jay Ritter (IPOs by year); Jay Ritter, Martin Kenney and Donald Patton (IPO employment)
Apple Inc. followed a similar path. Co-founder Steve Jobs made it a mission early in his Apple career and after creating NeXT Inc., another computer maker, to revitalize U.S. manufacturing. Macintosh computers rolled off the line at an Apple factory “like a Holiday Inn toaster turns out toasted bagels,” says Brent Schlender, who co-wrote a biography of Mr. Jobs.
By the time Mr. Jobs died in 2011, Apple made nearly every one of its products outside America, largely in Asia. Apple halted U.S. manufacturing in 2004 and didn’t resume until 2013, when it began producing Mac Pro personal computersin Austin, Texas.
Apple says it employs about 80,000 workers in the U.S., or two-thirds of the company’s overall workforce. About half the U.S. employees have retail jobs.
An Apple spokeswoman says it is “creating jobs in new industries like the App Economy,” or apps developed for the iPhone, and is “a major contributor to U.S. manufacturing” by buying American-made components and materials.
Mr. Schlender, the Jobs biographer, says it made sense to assemble the iPod outside the U.S. when production began in 2001. “The components were hard to make, and putting them together was a labor-intensive job because everything was so small,” he says. “You had to piece it together by hand.”
The computer-hardware exodus spread. International Business Machines Corp. , the company that turned computers into a big business, was born in Endicott, N.Y., and built its first factories there.
From 2001 to 2015, though, employment in computer and electronics manufacturing in surrounding Broome County fell about two-thirds to 3,055 jobs. Warehouses and transportation companies scooped up some laid-off workers at salaries of less than half those paid in high-tech manufacturing, says Christian Harris, an analyst for the New York State Department of Labor.
Apple co-founder Steve Jobs at MacWorld Expo in San Francisco in January 1999. He pushed to revitalize U.S. manufacturing, but the company stopped making products in the U.S. in 2004 and didn’t resume until 2013.
Apple co-founder Steve Jobs at MacWorld Expo in San Francisco in January 1999. He pushed to revitalize U.S. manufacturing, but the company stopped making products in the U.S. in 2004 and didn’t resume until 2013. PHOTO:JOHN G. MABANGLO/AFP/GETTY IMAGES
American tech workers are getting a smaller piece of the economic pie created from what they produce. As of 2014, employee compensation in computer and electronic-parts making was equal to 49% of the value of the industry’s output, down from 79% in 1999, according to the Commerce Department.
While other tech jobs have been created in sectors such as software publishing, that growth is smaller than the losses in tech manufacturing.
Since 2002, the number of technology startups has slowed, hurting job creation.In a 2014 study, economists Javier Miranda, John Haltiwanger and Ian Hathaway said the growth of tech startups accelerated to 113,000 in 2001 from 64,000 in 1992.
That number slumped to 79,000 in 2011 and hasn’t recovered, according to the economists’ calculations using updated data. The causes include global competition and increased domestic regulation, says Mr. Haltiwanger, an economics professor at the University of Maryland.
Jay Ritter, a professor at the University of Florida’s Warrington College of Business, says there were 548 initial public offerings of technology-related companies from 2001 to 2015. From 1990 to 2000, by contrast, 1,853 went public.Another problem is that fewer tech companies have gone public, which can enrich early employees and spawn more jobs as companies grow.
The latest generation of hot tech startups has attracted a mountain of venture-capital funding and gigantic valuations, led by Uber Technologies Inc., which was worth $68 billion as of June.
The influx of wealth has created more prosperity in Silicon Valley butexemplifies the economic polarization rippling through America.
WhatsApp had more than 450 million users world-wide when Facebook bought the messaging service for $19 billion in 2014, turning founder Jan Koum into a billionaire several times over. At the time of the acquisition, WhatsApp had 55 employees.
Economists call the phenomenon “skill-biased technical change.” The spoils of growth go to those few people with skills and luck and who are best positioned to take advantage of new technology.
The five largest U.S.-based technology companies by stock-market value—Apple, Alphabet, Microsoft, Facebook and Oracle Corp. —are worth a combined $1.8 trillion today. That is 80% more than the five largest tech companies in 2000.
Today’s five giants have 22% fewer workers than their predecessors, or a total of 434,505 as of last year, compared with 556,523 at Cisco Systems Inc., Intel, IBM, Oracle and Microsoft in 2000.
Robots help fill orders at an warehouse in Tracy, Calif., in December 2014. Amazon uses robots at about a third of its warehouses in the U.S.
Robots help fill orders at an warehouse in Tracy, Calif., in December 2014. Amazon uses robots at about a third of its warehouses in the U.S. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
Amazon uses 45,000 small robots at about one-third of its U.S. warehouses to automate order processing. The robots look like bread boxes on wheels, lifting modular shelves stuffed with products and carrying the shelves to workers who pick out pieces.
An Amazon spokesman says the company has added about 200,000 employees since it began using the robots in early 2012. Amazon has 268,000 employees world-wide.
Robots aren’t dexterous enough yet to identify different sized-packages, pick the right ones and place them safely in boxes, says Mr. Brynjolfsson, the MIT economist. That is the fundamental skill in warehousing. Researchers now are trying to automate that part of the job, too.
In coming decades, machines are likely to replace new forms of routine work done by humans. From 1991 to 2001, the number of secretaries declined about 35%, according to the Bureau of Labor Statistics. The number of textile and apparel workers fell 37%.
For a long time, those with bachelor’s degrees in science seemed to be safe from automation-related layoffs because their cognitive knowledge was tough for computers to duplicate. Less-educated workers who dispense personal service, such as home health aides or masseuses, also seemed safe.
Harvard University economist David Deming estimates that the hollowing-out of work spread to programmers, librarians and engineers between 2000 and 2012. As much as $2 trillion worth of human economic activity could be automated away using existing technologies, such as Amazon’s robots, in coming years, consulting firm McKinsey & Co. estimates.
Knightscope Inc., based in Mountain View, Calif., makes robots that serve as night watchmen. About three dozen are on patrol, including at shopping malls, corporate campuses such as Microsoft’s in Mountain View and the new home arena of the Sacramento Kings. Knightscope clients pay $7 an hour per robot.
“Robots don’t complain,” says Stacy Stephens, a Knightscope co-founder and vice president of marketing and sales. “There’s no pension. And there’s no worker’s comp,” he adds.

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