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Chinese stocks lost 30% this year, has China’s lost decade begun?

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I predicted dire times for China six years ago, when Xi Jinping amended the constitution to make himself leader for life, in charge of the government, the party, the military, and the banks. Emperor, I called him, here. It now seems the collapse has begun, or at least stagnation. Chinese history is cyclic. Good times of peace and plenty give rise to a supreme emperor whose excesses bring war and famine, or at least stagnation. The cycle repeats every 50 to 100 years. Since Nixon opened China in 1973, the country has seen 50 years of prosperity and spectacular growth, but the growth has stopped and may be in decline. The stock market (Shanghai Shenzen 300) peaked in 2021 and has declined 50% from there. It’s down 30% for the last 12 months to levels seen in December 2010. US growth seemed slower than China’s but it’s been more steady. The main US stock market, the S+P 500, has more than tripled since 2010, up 24.5% this year.

Five years of the Shanghai 300 index with hardly any change. There has hardly been change in 15 years. One could argue that the lost decade is here and on-going. .

Each year Chairman Xi’s behaves more dictatorial. Last year he arrested his predecessor, Hu Jintao in front of the Communist party. He now tracks all his citizens actions by way of face recognition and phone software, and gives demerits for wrong thinking and wrong behaviors. You lose merits by buying western cars or visiting western internet sites. Taking money abroad is generally illegal. Needless to say, such behavior causes people to want to take money abroad, just in case. Last week, Xi proposed a limit on video game playing and clamped down on banks, demanding low interest rates. This is bad for the gaming corporations and teenagers, and banks, but so far there are no protests as there is no war.

Kissinger said that war was likely, though. Xi is building the navy at a fast pace, adding fast surface ships, nuclear submarines, aircraft carriers, and new attack airplanes. They’ve added hypersonic missiles too, and added listening stations and bases. There’s now a naval base in Djibouti, at the entrance to the Red Sea, where they oversee (or promote?) Iran’s attacks on Western shipping. Then there are the new Chinese Islands that were built to take oil and fishing rights, and to provide yet more military bases on key trade routes. These could easily be a trigger for war, but so far just one military interaction in the region. Last month, the Chinese and Philippines navy clashed over fishing!

In the Gulf of Finland last Month, a Chinese ship, New New Polarbear, destroyed the offshore cables and gas pipes between Finland and Estonia, in protest of Finland’s entry into NATO. It’s belligerent but not war. Undersea cables are not covered by the UN charter, law of the sea. Then there is the evidence that COVID-19 was the result of Chinese bioweapon development, and the Chinese spy ballon that was sent over the US. We maintain at peace, but an unsettled sort of peace — is it a preface to war? Wars don’t have to be big war against the west or Taiwan, more likely is Vietnam, IMHO.

China’s negative population growth means that property values will drop along with product consumption. Kids buy stuff; old folks don’t.

News from China is increasingly unreliable so it’s hard to tell what’s going on. There were claims of a coupe, but perhaps it was fake news. Reporters and spies have been arrested or shot so there is no window on anyone who knows. There are claims of high unemployment, and COVID deaths, and claims of a movement to “lie flat” and stop working. Perhaps that was behind the ban on excessive gaming. Who knows? Xi claims that China is self sufficient in food production, but record food shipments from the US to China suggest otherwise.

Major businesspeople have disappeared, often to reappear as changed men or women. Most recently, Jimmy Lai, the Hong Kong clothing magnate, was indicted for sedition by tweets. Perhaps he just wanted to fire workers, or pay down debt, or move abroad (his daughter is). Many businesses exist just to make jobs, it seems. Not all of these businesses are efficient, or profitable. Some exist to violate US patents or steal technology, particularly military technology. I suspect that China’s hot new car company, BYD, is a money-losing, job factory, behind Tesla in every open market. Some 91 public firms have delisted over the last two years, effectively vanishing from oversight. Are they gone, or still operating as employment zombies. Will BYD join them? If China manages to avoid war, I have to expect stagnation, a “lost decade” or two, as in Japan saw from 1990 to 2010, as they unwound their unprofitable businesses.

A sign suggesting that a Chinese lost decade has begun is that China’s is seeing deflation, a negative inflation rate of -0.2%/year according to the world bank. It seems people want to hold money, and don’t want Chinese products, services, or investment. Japan saw this and tried a mix of regulation and negative interest rates to revive the interest, basically paying people to borrow in hopes they spend.

In Japan, the main cause of their deflation seems to have been an excess of borrowing against overvalued and unoccupied real estate. The borrowed money was used to support unprofitable businesses to buy more real estate. This seems to be happening in China too. As in Japan, China originally needed new lots of new apartments when they opened up and people started moving to the cities. The first apartments increased in value greatly so people built more. But now they have about 100% oversupply: one unoccupied or half-built apartment for every one occupied, with many mortgaged to the hilt against other overvalued apartments and flailing businesses.

Chinese Dept, personal and corporate match Japan’s at the start of the lost decade(s). Personal debt is at 150% of GDP, corporate debt is at65% of GDP, all propped up by real estate.

As in Japan 30 years ago, China’s corporate + personal debt is now about two times their GDP. Japan tried to stop the deflation and collapse by increased lending, and wasteful infrastructure projects. People in the know sent the borrowed money abroad confident that they would repay less when they repaid. We are already seeing this; low interest loans, money flowing abroad and a profusion of fast trains, unused roads, and unused bridges. I suspect most fast trains don’t pay off, as planes are faster and cheaper. These investments are just postponing the collapse. China is also seeing a birth dearth, 1.1 children per woman. This means that within a generation there will be half as many new workers and families to use the trains, or occupy the apartments. As the country ages, retirees will need more services with fewer people to provide them. China’s culture promotes abortion. China’s working population will decline for the next 30 years at least.

Japan came through all this without war, somewhat poorer, but unified and modern. It helped that Japan was a democracy, unified in culture, with an open press and good leaders (Abe). There was no collapse, as such, but 20 years of stagnation. China is a dictatorship, with a disunited culture, and a closed press. I think it will get through this, but it will have a much rougher time.

Robert Buxbaum January 9, 2024. China isn’t alone in facing collapse and/or lost decades. Germany is in a similar state, especially since the start of the Ukraine war. It’s a democracy like Japan, and pacifist for now.

The Brexit, Trump, Johnson anti-crash

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Before Brexit, I opined, against all respectable economists, that a vote for Bexit would not sink the British economy. Switzerland, I argued, was outside the EU, and their economy was doing fine. Similarly, Norway, Iceland, and Israel — all were outside the EU and showed no obvious signs of riots, food shortages, or any of the other disasters predicted for an exited Britain. Pollsters were sure that Britain would vote “No” but, as it happened, they voted yes. The experts despaired, but the London stock market surged. It’s up 250% since the Brexit vote.

Lodon stock market prices from January 2016 through the Brexit vote, August 2016, to the Boris Johnson election, August 2019. The price has risen by more than 250%.

A very similar thing happened with the election of Trump and of Boris Johnson. In 2016 virtually every news paper supported Ms Clinton, and every respectable economic expert predicted financial disaster if he should, somehow win. As with Brexit, the experts were calmed by polls showing that Trump would, almost certainly lose. He won, and as with Brexit, the stock market took off. Today, after a correction that I over-worried about, the S+P index remains up 35% from when Trump was elected. As of today, it’s 2872, not far from the historic high of 3049. Better yet, unemployment is down to record levels, especially for black and hispanic workers, and employment is way up, We’ve added about 1% of adult workers to the US workforce, since 2017, see Federal Reserve chart below.

Returning to Britain, the economic establishment have been predicting food shortages, job losses and a strong stock market correction unless Brexit was re-voted and rejected. Instead, the ruling Conservative party elected Boris Johnson to prime-minister, “no deal” Brexiter. The stock market responded with a tremendous single day leap. See above

Ratio of Civilian Employment to US Population. Since Trump’s election, we’ve added about 1% of the working age US population to the ranks of the employed.

You’d think the experts would show embarrassment for their string of errors. Perhaps they would save some face by saying they were blinded by prejudice, or that their models had a minor flaw that they’ve now corrected, but they have not said anything of the sort. Paul Krugman of the New York Times, for example, had predicted a recession that would last as long as Trump did, and has kept up his predictions. He’s claimed a bone rattling stock crash continuously for nearly three years now, predicting historic unemployment. He has been rewarded with being wrong every week, but he’s also increased the readership of the New York Times. So perhaps he’s doing his job.

I credit our low un-employment rate to Trump’s tariffs and to immigration control. When you make imports expensive, folks tend to make more at home. Similarly, with immigration, when you keep out illegal workers, folks hire more legal ones. I suspect the same forces are working in Britain. Immigration is a good thing, but I think you want to bring in hard-working, skilled, honest folks to the extent possible. I’m happy to have fruit pickers, but would like to avoid drug runners and revolutionaries, even if they have problems at home.

I still see no immediate stock collapse, by the way. One reason is P/E analysis, in particular Schiller’s P/E analysis (he won a Nobel prize for this). Normal P/E analysis compares the profitability of companies to their price and to the bond rate. The inverse of the P/E is called the earnings yield. As of today, it’s 4.7%. This is to say, every dollar worth of the average S+P 500 stock generates 4.7¢ in profits. Not great, but it’s a lot better than the 10-year bond return, today about 1.5%.

The Schiller P/E is an improved version of this classic analysis. It compares stock prices to each company’s historic profitability, inflation adjusted for 10 years. Schiller showed that this historic data is a better measure of profitability than this year’s profitability. As of today, the Schiller P/E is 29.5, suggesting an average corporate profitability of 3.5%. This is still higher than the ten-year bond rate. The difference between them is 2%, and that is about the historic norm. Meanwhile, in the EU, interest rates are negative. The ten year in Germany is -0.7%. This suggests to me that folks are desperate to avoid German bank vaults, and German stocks. From my perspective, Trump, Johnson, and the Fed seem to be doing much better jobs than the EU bankers and pendents.

Robert E. Buxbaum, August 16, 2019.

Trump, tariffs, and the national debt

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My previous post was about US foreign policy, Obama’s and Trumps. This one is about Trump’s domestic policy as I see it. The main thing I see, the pattern is that I think he’s trying to do is pay down the national debt while increasing employment. So far unemployment is down, but borrowing is not. I suspect that a major reason for the low unemployment is that Americans (particularly black Americans) are taking jobs that used to be held by Mexicans. As for US borrowing, it’s still bad. For his first budget, Trump, like all other recent politicians caved to the forces that favor borrow and spend than to pay back. In this century, only Wm. McKinley, Theodore Roosevelt, Taft, Harding, and Coolidge managed to pay down the national debt. But only one man, Andrew Jackson, managed to pay it off completely. Jackson’s picture hangs in the pride of place in the Trump white house, something that I find significant. I suspect that Trump’s tariffs and spats are intended to pay down the debt without raising unemployment, or weakening the military. Andrew Jackson is his idea of “Make America Great Again.”

All recent presidents have raised the national debt. Trump claims he will shrink it.

All recent presidents have raised the national debt. Trump data to April 20, 2018.

As the graph above shows, if Trump plan is to pay down the debt, he is not succeeding. Trump is overspending — at a somewhat slower rate than other recent presidents, but in 1 1/4 year he’s increased the debt by 6.3%, about $1220 B. He’s saved a few billion by reduced payments to the UN, and to the EU for climate studies, and he’s asking NATO to pay more for Europe’s defense, but he’ll have to do a lot more, and the rest of the world is already unhappy with him.

Many US economists — Keynesians – are not happy with him for another reason. They claim that debt is good, and that borrowing increases employment. As proof they note that FDR borrowed and spent heavily though the 1930s,and we got out of the depression. Other economists point out that it took longer in the US to get out of the depression than in many other countries. More recently, under Jimmy Carter, deficit spending created a combination of high inflation and high unemployment, “stagflation,” suggesting that Keynes should be modified to “Neo Keynesians” who claim you can overspend if you don’t outspend the GDP growth rate. Sorry to say, even in these terms, Obama and GW Bush overspent badly, as did Reagan before them (see graph below). Obama raised the debt from 65% of the GDP to its current 105%, and GW Bush raised it from 50% of GDP to 65%. This borrowing did not increase employment, or raise the standard of living for most Americans, though several at the top became fabulously wealthy. As Alan Greenspan noted, “If national borrowing was a path to wealth, Zimbabwe would be the richest country on earth.” I’m more of a hard money man, as Greenspan was, inclined to think that a balanced budget is good, and that tariffs are good too.

Ratio of US government debt to GDP

Ratio of US government debt to GDP

As of June 1, 2018, Trump has imposed ~20% tariffs on five items: wood, steel, aluminum, washing machines, and solar panels. Combined, these items constitute 4.1% of our imports, $130 B/ year. Taxed at 20%, the US will collect $25 B/year. it’s a step, but I suspect that Trump knows that, if tariffs are to wipe out all of our deficit, he’ll have to impose a lot more, about 40% on all of our imports ($3,100 B/year). Trump may yet do this, and may yet cut spending, and put a lot more America to work. My sense is that this is his aim.

The next step in the Trump MAGA plan involves adding another $35B to the list of items being taxed; that’s about 1.1% of US imports (5.2% total). In response, our trade-partners have complained to the press and to the world court, and have imposed their own tariffs — so far on about $100 B of US products, mostly food items, like bourbon and cheese, chosen to hit Republicans in politically – sensitive states: Tennessee and Wisconsin. Canada now taxes US cheese at over 100%. It’s an effort to embarrass Trump and get Democrats elected in 2018. If these tactics don’t work, Trump will impose another round, e.g. on foreign-made cars and motorcycles. I’d also expect him to cut NATO funding unilaterally, too, as a counter-slap to the EU.

US unemployment by race

US unemployment by race, data to May 2018.

Speaking of Keynesian economists, Nobel Laureate economist, Paul Krugman of the New York Times has been predicting severe job losses, and a permanent stock collapse since 2016, and especially following Trump’s election. Virtually every week he announces that the end is near, and every month the economy looks better. But he’s not deterred, and neither are most economists. In a survey of nearly 100 economists by Reuters, 80% said that Trump’s policies will hurt the U.S. economy, and the rest said there would be little or no effect.[1] . So far it looks like they are all wrong. Unemployment is at record lows, particularly for African-Americans (see chart above); we’re adding new jobs at the rate of 200,000 new jobs per month, nearly 0.8% of the population per year. Inflation is a modest 2.3%, GDP growth is excellent, at 3.2% (or an incredible 4.5%). All we need now is a sensible immigration policy plus some healthcare reform, a modified social security tax, and for the economy to stay this way for another 5-10 years. It’s unlikely, but that’s the plan.

Robert Buxbaum, July 5, 2018. I’d hoped to see the employment and deficit numbers for June by now, but it’s not out. I’ve also argued that free trade is half right, as there is a benefit to workers, And there is a certain greatness that comes from paying your bills. Today, the EU offered to lower some auto tariffs if Trump does not move forward.

Michigan, an emerging economy

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Between 2009 and 2014, Michigan’s per-capita GDP grew at 14% per year, an amazing growth rate similar to that of an emerging, tiger economies. According tot the Bureau of Economic analysis, the only US states that grew faster were Texas and North Dakota, and these oil states were hit badly in the current year 2015-16.
GDPGROWTH

 

Unfortunately, Michigan remains relatively poor despite it’s growth. Its per-capita GDP, $20,263 (2016), lags behind even perennial backwaters like Vermont, Oklahoma, and Missouri. The wealth gap in Michigan is growing, as in an emerging economy, and the cities, e.g. Detroit and Flint, are known for high murder rates, and a large-scale bankruptcy.

Michigan population change, Detroit Free Press

Michigan population change, Detroit Free Press

Then there’s pollution and flooding. Our beaches close for e-coli after every major rain, and we recently found that the drinking water in Flint was contaminated with lead; it seems other MI cities have lead problems too. Add to this, that we’ve  had major floods, a result of mismanagement, cronyism, and rampant growth, and Michigan keeps looking more and more like Vietnam, China, and India.

Everything here isn’t third world, though. We replaced our hapless, ex-governor Granholm with a relatively competent (in my opinion) nerd, Rick Snyder. We’ve jailed the of worst crooks, e.g. Detroit’s walking-crime-wave mayor, Kwame Kilpatrick, and his father, “Pay-for-play”, and the corrupt city manager, Bobby Ferguson. Under the previous administration, the state population shrank. It is now growing slowly.

Flood of 2014; the view at 696 and Mound rd. It's just incompetence.

Flood of 2014; the view at 696 and Mound rd. It’s part incompetence and part growth.

 

We passed a needed roads bill. Taxes are high, but not as bad as Illinois, and even Detroit is beginning to look good, at least in the center city. Industry is coming back, and so is Michigan real-estate. Here are some of my ideas going forward: pay our teachers well, and don’t imprison for so long. Some ideas to keep us on the upswing.

Robert Buxbaum, February 23, 2016. I’m running to be the Oakland county water commissioner, by the way.

My solution to the world’s problems: better people

Most of the problems of the world are caused by people. Look at war, it’s caused by people; look at pollution, people; look at overeating, or welfare, or gun violence. You name it, the problem is people. My simple solution, then: better people. Immigration is a simple solution for a county that can do it selectively (take in the best, leave the rest); it’s worked for the US and it doesn’t have to beggar the third world. Education is another way to help, but we’re not quite sure what sort of education makes people better. “An uneducated man may steel from a boxcar, an educated one may steal the whole railroad.” Theodore Roosevelt is supposed to have quipped.

Those who claim they are uncommonly moral and good at teaching it have barely any proof that they are. American schools produce financially successful people, but not particularly moral ones; Europe’s approach is different, but there’s no indication they’ve done better at moral education. We look to the 18th century, or the Greeks, but they were no more moral than us, as best I can tell. The Taliban, the communists, or similar fundamentalists claim moral superiority over the west, but from my perspective, they look even worse. 

I notice that people learn morality from one another — that is each person acts like his neighbor. I also note that people tend to act better when they are involved, and feel part of whatever country, city or group they are in. Targeted immigration might bring in better people–honest, hard working, non-violent — and these people might help improve and motivate the locals. And even if we don’t improve by interaction, perhaps lazy Americans will ride on the backs of the hard-working immigrants. But it strikes me that the disconnect between world problems of high unemployment, world hunger, and lots of open, US jobs is a moral problem that could be solved by targeted love. Allowing some increased mobility from country to country and job to job (plus better preaching?). If you can move you are more-likely to find a job or place where you feel fulfilled, and you are likely to do better and more there. Even the countries and jobs that are left might benefit by being rid of their malcontents. And we don’t have to take everyone.

From "Hispanic-hope."

From “Hispanic-hope.”, an interesting combination of Bible-study and immigration morality.

Living in America is desirable for most people from most countries. Far more people want to live here than we can accept. As a result, we are in a position to target the bright, honest, hard-working Peoples from virtually any country. These folks are helpful to industry and to the US tax base as these immigrants tend to work out — or get deported. In the short-term they might displace Americans or depress salaries, but even that is not certain. There is no fixed slate of US jobs nor a fixed amount of work need. Yesterday’s job taker is tomorrow’s job creator. Our country is built on immigrants, and has not suffered from it. We should not take those who hate the US, or those who hate freedom, or have no skills, criminals and the sick. Nor should we give citizenship immediately. But that still leaves plenty who we’d want, and who want to be here. Th. Roosevelt said, “you can not take in too many of the right people, and even one of the wrong type is too many.” I suspect this is true.

I suspect we’d have 90+% odds picking good people from a crowd. The Immigration system does a good job now, and the great colleges have done better for years. The past is usually a great indicator. If someone is well, and has worked for years, or has been here in school; if they’ve managed to stay productive and out of trouble, he/she is a good candidate. A first step would be a work permit, and in a few years they can apply for permanent residence or citizenship. Many of the most successful people in America are either immigrants or descendents of immigrants. The founders of Google and Facebook; the builders and the shakers. These people have the ‘get-up and go.’ You can tell because they’ve gotten up and gone.

Dr. Robert Buxbaum, June 16, 2014. I’m a child of an immigrant, went to public school, got a PhD at Princeton, have built my own company, and have (so far) avoided arrest, imprisonment or serious scandal. With the help of my Canadian-immigrant wife, I’ve produced three Buxbaum clones, my biggest contribution to improving the US and the world.

A Masculinist History of the Modern World, pt. 1: Beards

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Most people who’ve been in university are familiar with feminist historical analysis: the history of the world as a long process of women’s empowerment. I thought there was a need for a masculinist history of the world, too, and as this was no-shave November, I thought it should focus on the importance of face hair in the modern world. I’d like to focus this post on the importance of beards, particularly in the rise of communism and of the Republican party. I note that all the early communists and Republicans were bearded. More-so, the only bearded US presidents have been Republicans, and that their main enemies from Boss Tweed, to Castro to Ho Chi Minh, have all been bearded too. I note too, that communism and the Republican party have flourished and stagnated along with the size of their beards, with a mustache interlude of the early to mid 20th century. I’ll shave that for my next post.

Marxism and the Republican Party started at about the same time, bearded. They then grew in parallel, with each presenting a face of bold, rugged, machismo, fighting the smooth tongues and chins of the Democrats and of Victorian society,and both favoring extending the franchise to women and the oppressed through the 1800s against opposition from weak-wristed, feminine liberalism.

Marx and Engles (middle) wrote the Communist Manifesto in 1848, the same year that Lincoln joined the new Republican Party, and the same year that saw Louis Napoleon (right) elected in France. The communists both wear full bards, but there is something not-quite sincere in the face hair at right and left.

Marx and Engels (middle) wrote the Communist Manifesto in 1848, the same year that Lincoln joined the new Republican Party, and the same year that saw Louis Napoleon (right) elected in France. The communists both wear full bards, but there is something not-quite sincere in the face hair at right and left.

Karl Marx (above, center left, not Groucho, left) founded the Communist League with Friedrich Engels, center right, in 1847 and wrote the communist manifesto a year later, in 1848. In 1848, too, Louis Napoleon would be elected, and the same year 1848 the anti-slavery free-soil party formed, made up of Whigs and Democrats who opposed extending slavery to the free soil of the western US. By 1856 the Free soils party had collapsed, along with the communist league. The core of the free soils formed the anti-slavery Republican party and chose as their candidate, bearded explorer John C. Fremont under the motto, “Free soil, free silver, free men.” For the next century, virtually all Republican presidential candidates would have face hair.

Lincoln the Whig had no beard -- he was the western representative of the party of Eastern elites. Lincoln the Republican grew whiskers. He was a log-cabin frontiersman, rail -splitter.

Lincoln, the Whig, had no beard — he was the western representative of the party of eastern elites. Lincoln, the Republican, grew whiskers. He was now a log-cabin frontiersman, rail-splitter.

In Europe, revolution was in the air: the battle of the barricades against clean-chined, Louis Napoleon. Marx (Karl) writes his first political economic work, the Critique of Political Economy, in 1857 presenting a theory of freedom by work value. The political economic solution of slavery: abolish property. Lincoln debates Douglas and begins a run for president while still clean-shaven. While Mr. Lincoln did not know about Karl Marx, Marx knew about Lincoln. In the 1850s and 60s he was employed as a correspondent  for the International Herald Tribune, writing about American politics, in particular about the American struggle with slavery and inflation/ deflation cycles.

William Jennings Bryan, 3 time Democrat presidential candidate, opponent of alcohol, evolution, and face hair.

William Jennings Bryan was three-times the Democratic presidential candidate; more often than anyone else. He opposed alcohol, gambling, big banks, intervention abroad, monopoly business, teaching evolution, and gold — but he supported the KKK, and unlike most Democrats, women’s suffrage.

As time passed, bearded frontier Republicans would fight against the corruption of Tammany Hall, and the offense to freedom presented by prohibition, anti industry sentiment, and anti gambling laws. Against them, clean-shaven Democrat elites could claim they were only trying to take care of a weak-willed population that needed their help. The Communists would gain power in Russia, China, and Vietnam fighting against elites too, not only in their own countries but American and British elites who (they felt) were keeping them down by a sort of mommy imperialism.

In the US, moderate Republicans (with mustaches) would try to show a gentler side to this imperialism, while fighting against Democrat isolationism. Mustached Communists would also present a gentler imperialism by helping communist candidates in Europe, Cuba, and the far east. But each was heading toward a synthesis of ideas. The republicans embraced (eventually) the minimum wage and social security. Communists embraced (eventually) some limited amount of capitalism as a way to fight starvation. In my life-time, the Republicans could win elections by claiming to fight communism, and communists could brand Republicans as “crazy war-mongers”, but the bureaucrats running things were more alike than different. When the bureaucrats sat down together, it was as in Animal Farm, you could look from one to the other and hardly see any difference.

The history of Communism seen as a decline in face hair. The long march from the beard to the bare.

The history of Communism seen as a decline in face hair. The long march from the beard to the bare. From rugged individualism to mommy state socialism. Where do we go from here?

Today both movements provide just the barest opposition to the Democratic Party in the US, and to bureaucratic socialism in China and the former Soviet Union. All politicians oppose alcohol, drugs, and gambling, at least officially; all oppose laser faire, monopoly business and the gold standard in favor of government created competition and (semi-controlled) inflation. All oppose wide-open immigration, and interventionism (the Republicans and Communists a little less). Whoever is in power, it seems the beardless, mommy conservatism of William Jennings Bryan has won. Most people are happy with the state providing our needs, and protecting our morals. is this to be the permanent state of the world? There is no obvious opposition to the mommy state. But without opposition won’t these socialist elites become more and more oppressive? I propose a bold answer, not one cut from the old cloth; the old paradigms are dead. The new opposition must sprout from the bare chin that is the new normal. Behold the new breed of beard.

The future opposition must grow from the barren ground of the new normal.

The future opposition must grow from the barren ground of the new normal. Another random thought on the political implications of no-shave November.

by Robert E. Buxbaum, No Shave, November 15, 2013. Keep watch for part 2 in this horrible (tongue in) cheek series: World War 2: Big mustache vs little mustache. See also: Roosevelt: a man, a moose, a mustache, and The surrealism of Salvador: man on a mustache.

 

Chaos, Stocks, and Global Warming

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Two weeks ago, I discussed black-body radiation and showed how you calculate the rate of radiative heat transfer from any object. Based on this, I claimed that basal metabolism (the rate of calorie burning for people at rest) was really proportional to surface area, not weight as in most charts. I also claimed that it should be near-impossible to lose weight through exercise, and went on to explain why we cover the hot parts of our hydrogen purifiers and hydrogen generators in aluminum foil.

I’d previously discussed chaos and posted a chart of the earth’s temperature over the last 600,000 years. I’d now like to combine these discussions to give some personal (R. E. Buxbaum) thoughts on global warming.

Black-body radiation differs from normal heat transfer in that the rate is proportional to emissivity and is very sensitive to temperature. We can expect the rate of heat transfer from the sun to earth will follow these rules, and that the rate from the earth will behave similarly.

That the earth is getting warmer is seen as proof that the carbon dioxide we produce is considered proof that we are changing the earth’s emissivity so that we absorb more of the sun’s radiation while emitting less (relatively), but things are not so simple. Carbon dioxide should, indeed promote terrestrial heating, but a hotter earth should have more clouds and these clouds should reflect solar radiation, while allowing the earth’s heat to radiate into space. Also, this model would suggest slow, gradual heating beginning, perhaps in 1850, but the earth’s climate is chaotic with a fractal temperature rise that has been going on for the last 15,000 years (see figure).

Recent temperature variation as measured from the Greenland Ice. A previous post had the temperature variation over the past 600,000 years.

Recent temperature variation as measured from the Greenland Ice. Like the stock market, it shows aspects of chaos.

Over a larger time scale, the earth’s temperature looks, chaotic and cyclical (see the graph of global temperature in this post) with ice ages every 120,000 years, and chaotic, fractal variation at times spans of 100 -1000 years. The earth’s temperature is self-similar too; that is, its variation looks the same if one scales time and temperature. This is something that is seen whenever a system possess feedback and complexity. It’s seen also in the economy (below), a system with complexity and feedback.

Manufacturing Profit is typically chaotic -- something that makes it exciting.

Manufacturing Profit is typically chaotic — and seems to have cold spells very similar to the ice ages seen above.

The economy of any city is complex, and the world economy even more so. No one part changes independent of the others, and as a result we can expect to see chaotic, self-similar stock and commodity prices for the foreseeable future. As with global temperature, the economic data over a 10 year scale looks like economic data over a 100 year scale. Surprisingly,  the economic data looks similar to the earth temperature data over a 100 year or 1000 year scale. It takes a strange person to guess either consistently as both are chaotic and fractal.

gomez3

It takes a rather chaotic person to really enjoy stock trading (Seen here, Gomez Addams of the Addams Family TV show).

Clouds and ice play roles in the earth’s feedback mechanisms. Clouds tend to increase when more of the sun’s light heats the oceans, but the more clouds, the less heat gets through to the oceans. Thus clouds tend to stabilize our temperature. The effect of ice is to destabilize: the more heat that gets to the ice, the more melts and the less of the suns heat is reflected to space. There is time-delay too, caused by the melting flow of ice and ocean currents as driven by temperature differences among the ocean layers, and (it seems) by salinity. The net result, instability and chaos.

The sun has chaotic weather too. The rate of the solar reactions that heat the earth increases with temperature and density in the sun’s interior: when a volume of the sun gets hotter, the reaction rates pick up making the volume yet-hotter. The temperature keeps rising, and the heat radiated to the earth keeps increasing, until a density current develops in the sun. The hot area is then cooled by moving to the surface and the rate of solar output decreases. It is quite likely that some part of our global temperature rise derives from this chaotic variation in solar output. The ice caps of Mars are receding.

The change in martian ice could be from the sun, or it might be from Martian dust in the air. If so, it suggests yet another feedback system for the earth. When economic times age good we have more money to spend on agriculture and air pollution control. For all we know, the main feedback loops involve dust and smog in the air. Perhaps, the earth is getting warmer because we’ve got no reflective cloud of dust as in the dust-bowl days, and our cities are no longer covered by a layer of thick, black (reflective) smog. If so, we should be happy to have the extra warmth.

Michigan tax wrongs righted

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This month, at last, the Michigan legislature began to take seriously the job of correcting some tax wrongs that needed correcting for years. The most important change: they decreased the tax on business property (only by 10% but it’s a start) and shifted the burden to a tax on business profit.

The personal property tax was paid on any equipment, inventory, or supplies that a business kept in-house. No matter if their were sales or none, a tax was due so long as a business had equipment or unsold inventory. Even in years where there were no profits or sales, money was due to the state — a tax on your dreams of somehow making a go of things. Aside from its complexity of valuing your unused supplies and inventory, the tax guaranteed that struggling businesses would fail — immediately. The governor (Granholm – glad she’s gone) claimed that taxing unused equipment and inventory protected the state coffers from the ups and downs of the business cycle, but the state was is far better shape than a struggling business when it came to the cost of borrowing. Besides, I’m not sure she was doing Michigan any favors by destroying businesses that were barely hanging on.

Governor Granholm (thank G-d she’s gone) gave out the money she collected to the right sort of people, her friends, and to targeted businesses that she liked: e.g. movie makers who made money-losing, dystopian films and left as soon as the checks cashed. The current governor, Snyder claims his aim is to eliminate the business property tax in 10 years, 10% at a time. I hope, we’ll see.

Another tax that’s now gone, at last, is the 0.8% on transactions between businesses. It wasn’t an unfair tax like the property tax, but was annoying to keep track of. What a mess. Keep up the good work, lads. Now if only they can do something about Detroit’s uncommonly high minimum wage.

Robert Buxbaum, November 20, 2012

Detroit economics and the minimum wage

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A cause of Detroit’s financial problems, it seems to me, is that Detroit has an uncommonly high minimum wage, $13.75/hr for all employees in any company that contracts with the city and does not provide free health care; or $10.50/hr for companies that provide healthcare. This minimum, called a living wage, is about double the state minimum wage of $7.40.

Although the city is financially bankrupt, the city can not hire janitors and pay less than this, nor hire accountants from a company that pays its janitors less than this. Besides the burden on Detroit’s budget, this puts a burden on its unemployment system. Many in Detroit don’t possess the education or skills to justify jobs at this wage. This high minimum wage effectively cuts them from the bottom rung of jobs at these companies — jobs at the bottom of the ladder of success. Many businesses find innovative ways around the law, using corruption and bribes to skirt enforcement, if the recent trials of the mayor are any indication, but a system of corruption is not good for the city.

As these wages are far above standard, most employed workers for the city get their jobs by corruption and connections, and most everyone knows they got their jobs this way rather than skill. As a result, workers have no incentive to improve at their job. In a corrupt system like this, there is no likelihood that  a raise would come with improved performance.

The justification for the living wage is the cost to support a family of 4 or 5, but Detroit is a much cheaper place to live than most, and not all workers are supporting families of 4 or 5. It therefore makes little sense to force all potential workers to refuse entry-level employment at $8.00/hour, a wage that would allow a single, motivated individual a decent living and a chance to climb as his/her needs and skills grew. Instead of promoting hard work and merit, this ordinance fosters corruption and cronyism; it makes it expensive for the city to hire contractors, makes it hard for workers to get their first jobs, and removes the benefits that normally come with improved skills. It’s a disaster, I suspect, and a reason the city is bankrupt.

Dr. Robert E. Buxbaum is a self-employed curmudgeon who tries to speak the truth as he sees it.