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Discussion with Reagan's Budget Director David Stockman to talk about the economy
Stockman: [the Keynesian theory] "is fundamentally wrong, and the reason why the economy can't get up off the mat."
Now, Mr. Stockman may or may not be correct with respect to the Keynesian theory, but I am intrigued that he, and virtually every other well-educated (read: "upper class") politician or economist evidently finds it impossible to discuss the very large elephant in the room: There are no longer an adequate number of decent-paying low-skilled jobs in the United States, and most likely there never will be again.
An earlier (and excellent) Casey presentation discussed how there was investment money to be made in robotics, which Mr. Casey believes is on the threshold of a major advance. This may well be true- he described at length the application of robotics in increasing, for instance, the efficiency of Amazon's distribution systems.
In the San Francisco area, the Golden Gate Bridge announced today that effective shortly they were eliminating all of the toll-takers. The state toll bridges announced that they were watching with interest, as they intend to follow if the change is successful. We also now have restaurants which have eliminated wait staff- you're supposed to order using your smart-phone, and serve yourself. Home Depot has eliminated most of their checkers/cashiers, and already some grocery chains are attempting to follow. I have also seen this technology application in Europe- they are actually a bit ahead of us in this area.
Neither Mr. Casey nor the Golden Gate Bridge directors had any suggestions for those whose jobs are about to disappear, nor did they even bother to mention that facet of the technological advance nor it's inevitable effect upon the overall economy.
I have no intention of proclaiming that all of these technological advances should be halted in the interests of job protection. But there are some really hard facts to be addressed here folks:
Between shifting low-skill production and assembly jobs "offshore", and continually eliminating other jobs by improved technology, we are creating a situation where, in plain English: there are not and will not be anywhere near the number of jobs necessary to provide enough income to allow a sufficient number of workers to lead a reasonable life and contribute tax-wise to the overall system. Sorry, but NO. Not now, not tomorrow, no matter who is president or who controls congress IT SIMPLY AIN"T GONNA WORK. Henry Ford well understood this, many years ago. It doesn't take a genius.
Yes, education and re-education will help, to some extent. But I submit that there is NO viable path forward from this situation, either short or long term. There are simply way more low-skilled individuals than there are matching jobs. If anyone can show otherwise, I would be thrilled to be proven wrong.
I'll sort of bounce around with a response. It's not too early to write a lengthy response, but it's a little early to write an organized one.
In terms of smartphones, people always have gone on and on about how "Best Buy is a showroom for Amazon" and I always went, naaah, there has to be people who still are just going to go in.
Well, I don't do that much shopping (I hate clothes shopping like I did when I was 5), but I was shopping for shoes the other day and decided to use my new smartphone and the Redlaser app (investment note: Redlaser is owned by Ebay, so Ebay gets a ton of information on what people are scanning, and if someone scans something in a store to buy it online and clicks through to buy it online, I'm sure Redlaser sees a %.) The store did happen to have a slightly better price with a pair of shoes that were on sale than anywhere else, but not that much was on sale - with a majority of the store, I could have probably scanned something and found a better price somewhere else. You're going to see the price comparison apps evolve and probably get to the point where if you scan something and there's a store 2 miles away or elsewhere in a mall, something will pop up and give me a coupon if I go somewhere else. I see this all eventually ending in less competition and higher prices. (Speaking of higher prices, Amazon is definitely closer to retail price on a lot of things than they used to be.)
Redlaser is a barcode scanning app that allows you to compare prices locally and online. I started doing it while shopping and although it wasn't electronic items like Best Buy, I got what people were talking about. I know so much is moving to mobile, but when you start using it more, one can really understand what people are talking about. In ways it's exciting, but it clearly is going to create some serious issues, like the ones you've noted, that aren't really being addressed or broadly talked about.
There are some apps that "get people into stores" (Shopkick, where you can get points for walking into the door at places like Target), but with Amazon's app or Redlaser, anyone can scan a product in a B & M store and buy it online.
This is why I've said before retail is overbuilt in this country, but when you start using one of these devices in a shopping experience, it's all the more apparent. The only retail REITs I'd be remotely interested in are the high-end outlet mall concept (Tanger Outlets, which I don't own, or Simon, which is overpriced) or "necessity-based" REIT Retail Opportunity Investment (which I don't own.) Otherwise, mall REITS are going to have to evolve considerably to keep up with technology and change.
Other countries are well ahead of us in terms of things like mobile payments. Visa is going to force change to new EMV chip credit cards in this country, and look at these new credit cards from Gemalto that have a little display in the credit card (!): http://www.gemalto.com/financial/cards/display_interface.html
Gemalto (which is up over 100% in the last 52 weeks) is a French company (although I believe they have a US HQ in Austin) that is a real example of where things are headed (whether you believe it to be good or bad). I'd recommend looking around their website (http://www.gemalto.com/)
As I noted in another thread, I'd also recommend watching one or two of Visa's ridiculously slick "Currency of Progress" ads to see where things are going - http://www.youtube.com/user/CurrencyofProgress
As for the discussion of robots, was actually discussing that at a family gathering. Also used the Ford reference and that really summarizes it perfectly. As you said, it doesn't take a genius.
The other thing I've really noticed is that there is much less activity in retail banking, which, in many ways, is not surprising. When you offer people no-fee accounts if they don't come into the bank... (among many other reasons.) But that is a lot of commercial property space that will no longer be needed, or at least not nearly to the same degree.
There is no easy answer, but endless QE and currency debasement isn't going to fix these issues (nor do I actually think they're intended to, despite all the discussion from various levels of government.) It requires actual leadership from government, which is almost entirely lacking.
There was an article the other day about a grocery store in France opening where you can shop via a phone with NFC (http://www.nfcworld.com/2012/09/12/317798/casino-to-open-worlds-first-nfc-enabled-supermarket/) NFC = Near Field Communication. My only question is, if you walk through the store scanning things to add them to your "phone cart" for when you check out, how do they know when you swipe your phone to pay at the end that you have in your cart what you indicated? Do you have people like at Costco that check your cart against a receipt? Not really here-or-there, but I was wondering how that will go.
I'm surprised there has not been more in the way of the virtual stores that Tesco put up in South Korea, where there are giant posters in subways where you can scan the items like on a grocery shelf and have them delivered. I've thought about investing in giant French ad firm JC Decaux, who also handles street furniture in many major cities around the world. Eventually, you get more and more ads with QR codes and/or NFC where people scan banners to shop, get coupons or get other information.
I'll agree with him that it's fundamentally wrong, although there are a lot of reasons why the economy is doing how it is. No one in this government is going to address a lot of the structural issues that have built up for years and years (because it's not popular and you have a congress that can't agree on a thing - and I don't think that's an excuse to do nothing and call the other side meanies, either), so instead we have congresspeople telling Bernanke, "Get to work, Mr. Chairman" (which is completely and utterly admitting that "we are not going to do a damn thing, so you go print money.) However, given that Bernanke has no problem with running the printer 24/7 (if it's not clear from reading the Bernanke Doctrine that he worships the printing press and believes it's essentially the fix for all economic issues - read it again), he does.
QEs (and the remarkable thing to me is that there's still enormous debate on whether or not they have helped the economy when we're now on a third one that is essentially, QEInfinity, or, to use a term that will likely make it more appealing to the general public, iQE - if you get to the point where you have to do one that could theoretically go on forever, maybe it's not working) and interventions and whatnot help asset prices, although it's not a free lunch despite some people acting as if it is. Given that the top 1% owns a massive amount of the stocks and bonds in this country and the bottom 50% owns 0.5% (and that was 2007, imagine what it probably is now), you have a lot of people in this country who don't care.
Doing a QE focused on MBS helps the banks, hedge funds and the like (from highly regarded analyst Chris Whalen - "In fact, the latest Fed purchases are a gift to Fannie Mae and Freddie Mac, the TBTF banks and the hedge fund community. A fund on the floor of our offices in New York actually started dancing around like little children shouting “QE3” after the Bernanke press conference. http://www.zerohedge.com/contributed/2012-09-18/qe3-and-money-illusion")
It doesn't help the *fundamentals* of why many average people aren't buying a house. Oh, lets spend hundreds of billions to get the mortgage rate down a few basis points. Given that "median net worth of the middle class has plunged 28% since 2000 back to early 90s levels (while the upper tier class is up around 1%) and the lower tier down around 45%", (http://bloom.bg/S5daZ4), QE will just help the banks and those who own financial assets.
Or, to put it as Marc Faber does, “Yes. Property prices in the south of the U.S. are very inexpensive compared to property prices around the world. The tragedy is that the people that were evicted from these homes have no access to credit. They have no money. They can’t buy them. So, with easy money by the Fed well-to-do people can buy these properties and then rent them out to the people that were kicked out of these homes. What a great achievement of the Fed. First they create the property bubble and destroy the wealth of poor people, then the poor people have to rent and the rents have been up over the last 12 months. What a great achievement. Thank you, Mr. Bernanke.”
As Donald Trump said on CNBC, “People like me will benefit from this.”
Beyond that, you have gotten to the point with this sort of monetary policy where many question how there will ever be an exit from it.
You also have problems with price discovery, as I noted the other day, because you have governments that continually intervene if something is not to their liking.
So, there are a lot of problems, with technology and otherwise, and I have no hope that they will even begin to be addressed by this government, whose only idea appears to be continually to tell Bernanke, in one variation or another, to "get to work" doing what he does.
Oh, and Romney wouldn't be any better, either, but that doesn't excuse anything with the current administration.
Lastly, is Romney trying to lose? I mean, WTF. If this was "Survivor" or "Big Brother", he's playing a terrible social game.
My answer to him: "Austerity Economics" is fundamentally wrong when economic growth is slow or in recession, and the reason why the economy can't get up off the mat.
You can look at Europe has successful austerity that has been. In Reagan's time, it was a manufactured recession by Fed to break the back of inflation and they are making apples to oranges comparisons. The situation we have here is more like great depression. Before Keynesian stimulus was tried, nations around that time also tried Austerity and it did not work. Austerity in such great deflations cause to the race to bottom and much of the economy has to be destroyed before rebuild can happen. Human toll is great and especially painful for lower and middle classes.
Also, I consider this as a political post (and interview as political interview) since these folks has no problem increasing deficits and growing entitlements during Bush years.
Reply to @Investor: Well, he was honest enough to observe that the problem, at least as he sees it, goes back "30 or 40 years", so it wasn't aimed at any one political party. I completely understand that Stockman's position is an economic/political perspective, and I choose to ignore that fact for my comments.
My point is that NONE of these geniuses seem to acknowledge that we now have a major permanent systemic unemployment problem due to the mismatch in worker intelligence, education, native technological ability and skill sets.
Education and retraining can help here to a limited extent, but surely not enough to make a major dent. Every job that disappears due to "increased efficiency" is one less consumer able to purchase all of this efficiently manufactured stuff. And as we all know, consumers purchasing ever-increasing amounts of stuff is the vital underpinning of the whole damned economic structure. There simply has to be a "tipping point" in this equation, and I loved the way Stockman glossed over that aspect of the issue.
Again referring to the earlier Casey presentation, it was noted that robots are now even replacing nurses in some aspects of hospital services, and that this technology is already being employed in at least 100 European hospitals. The further up the skill set chain technology goes, the worse the human displacement is going to get. Does anyone seriously think that some entirely new industry requiring large numbers of low-skilled workers is going to appear to take care of this?
Reply to @Old_Joe: "My point is that NONE of these geniuses seem to acknowledge that we now have a major permanent systemic unemployment problem due to the mismatch in worker intelligence, education, native technological ability and skill sets."
That would be likely to some degree because they don't care.
Not to be extraordinarily cynical, but it has to become apparent at some point that the issues you discuss and issues revolving around it are - despite all the "talk" to the contrary - clearly not a priority to "these geniuses" or even those who are in a position to do a thing about it.
Anyone who believes that either side gives two bleeps about what's left of the middle class is delusional.
We have spent obscene amounts of money (in good times, bad times) over the last 30-40 years and gone into a ridiculous situation with debt, much of which can likely never be paid off. Rather than face that situation in the slightest (bailing out and propping up is not facing anything or letting the system clear), we choose to instead go "QE to infinity" in an apparent attempt to - among other things - pay off the debt with cheaper and cheaper dollars over time.
So the solution to 30-40 years of obscene spending is throwing enormous (historic, even) amounts of money at the problem (to the point where one has practically changed the psychology of money so that amounts that would have stunned the public not that long ago now get a shrug) so that we can hope the problem goes away and that we can get back as quickly as possible to 30-40 more years of obscene spending.
What was that quote from Tocqueville? "“The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” Yeah, that was the one. Why do anything difficult or stop promising stuff to the public that could be short-term unpopular but could do long-term good? "Get to work, Mr Bernanke", says congressfolk (so that you can make it easy for us congressfolk not to.)
You can't have congress doing nothing and just telling Bernanake to go print some more money. THAT DOESN'T WORK. Sorry, but our government actually has to do something - you can't just have constant Fed interventions and "hope that shoos the problems away." It won't, and beyond that, it could make some problems worse and cause new ones.
If we are going to buy and print our way out of every blip of a recession that comes along from here on out (which clearly seems to be the plan), gee, why didn't we think of this before? Buying our way out of having to face any economic problems. Ever. Because history has shown that has worked out really well.
Those who own stocks and bonds are pleased and they will likely be more pleased over time and be able to stay ahead of inflation to whatever degree they have in risk.
However, for the bottom 50% that own literally about 0.5% of the stocks and bonds, QE does not really fix anything of note, like the issues you discuss.
It's trying to reinflate without actually making the difficult decisions of fixing structural problems. It hasn't lead to a sustainable recovery and we will now have "open-ended" QE for a very. very. long. time.
All this (what you discuss, what I discuss, etc) will, however, likely eventually lead to some degree of social instability/unrest down the road.
Actual, you know, thought and decisions *begin* to fix the issues you are talking about. The problems you are talking about take real decisions, thought and leadership. That is not happening, nor will it. (It wouldn't happen under Romney either, although that won't happen because I'm starting to think he's trying to lose the election.)
You have an economy that has effectively been an instance of trying to cure a cancer patient with plastic surgery. They may look good on the outside, but doctors have addressed absolutely none of the structural/core problems and then the doctors wonder why the patient still has lingering cancer.
Sorry, you aren't going to fix the structural problems overnight. They are going to be difficult and take a very long time to fix, and that's just more time than anyone who has the power to wants to spend on that, especially when they want to get re-elected. . Still, you aren't going to get a sustainable recovery (you know, one that doesn't require iQE) until the structural issues are addressed. The longer it takes to even begin to address them, the bigger the task of fixing them. And, well, no one in government wants to do anything. So, there we are and here we'll be.
That involves tough decisions and the excuse that no one on the other side wants to work together so everyone's just going to sit on their f'ing hands and yell at Bernanke to do something.
You have a political system that's a complete mess, and absolutely none of your concerns are going to be addressed until they absolutely have to.
And by that point, who knows.
---------------------------
Oh, and just to throw in more hilarity regarding Romney and his terrible social game, his co-chairman (former gov Tim Pawlenty) just left the campaign and went to go lobby for Wall Street.
Also, I consider this as a political post (and interview as political interview) since these folks has no problem increasing deficits and growing entitlements during Bush years.
Medicare will change forever and replace with "vouchers" as VP candidate Paul Ryan propose. Who is making the bulk of money in the rising health cost?
By the way, David Stockman does not like much of the direction of today's conservatives.
I agree with Investor's comments above. In addition I didn't care for Stockman during Ronald Reagan's time and don't think much of his expressed views here - though I appreciate bee's linking it. David Stockman was a two-term Congressman from Michigan (1977-81), and later served as Director of OMB during Regan's first term (1981-85). He was never considered a brilliant economist, or for that matter, much of an "ideas person". His claim to fame was as a highly proficient "numbers-cruncher". Reagan and his managers exploited Stockman's reputed numbers skills - and boyish good looks (in contrast to the aging President) for all it was worth in honing their public image. Stockman later fell out of favor with Reagan for voicing views not consistent with the President's and left midway through Reagan's tenure. -
Each will have his or her own view of "Reaganomics", as Ronald Reagan's economic leadership came to be known. Mine fall along 3 lines. (1) Regan fired the nation's striking PATCO workers (air traffic controllers) and replaced them with non-union workers. His actions signaled the start of an attack on organized labor that has continued to the present - the latest salvo being the outlawing of collective bargaining by public employees in Wisconsin. (2) Reagan's first term was marked by the deepest, most severe recession of the post-war period. (3) Reagan's term in office oversaw record federal deficits for that day - largely due to a sharp buildup of U.S. military forces. -
In private business Stockman was less than remarkable. He lost $13 million personally running a company that eventually went bankrupt - causing large losses for others as well. Both civil and criminal charges were brought against him in connection with this, but later dropped. --- My own economic leanings based on prior readings and experiences leads me to side more with Nobel Prize winning economist Paul Krugman as regards the financial challenges facing our nation. I'm not able to articulate those views nearly as well as he can, so am linking one Paul Krugman interview, along with the Wikipedia article from which some of my material was drawn. I will say that sometimes the "instinctive" action isn't necessarily the correct one. Stockman's call for austerity will ring true with some: "You can't run a household this way!" However, you probably could - and maybe should - under certain circumstances if you coined your own money, made your own laws, had power to levy taxes, enter into treaties and wage war - among other sovereign powers and unique responsibilities.
"You can't run a household this way!" However, you probably could - and maybe should - under certain circumstances if you coined your own money, made your own laws, had power to levy taxes, enter into treaties and wage war - among other sovereign powers and unique responsibilities.
'Course, this is part of the disconnect between a large centralized operation; and also extends to congress/senate folks. When spending "opm", other peoples money; the lines may become blurred and even more difficult to determine whether an expected outcome came close to any targeted purpose. A grand economic experiment surrounds all of us, today.
Reply to @catch22: Hi Catch - OK, will agree it's a grand experiment on the part of the Fed & world banks. But the times present a "catch 22" situation - if you will. Many converging forces like the aging boomers, rise of China & SE Asia, declining domestic birth rates, busting of the housing bubble, market participation by the citizenry (a consequence of disappearing pensions) , etc. etc. have created the situation. A case can be made for deficit spending when circumstances warrant. Can't find a good source - and too important a point to make with just any source - but am of the belief that what ended the Great Depression and led to years of prosperity was massive deficit spending for WW II and Reconstruction. (Of course our competitors' infrastructure was in shambles too). The space race, moon landings, etc. provided another shot in the arm. So, ain't necessarily bad.
As I said earlier, I think it's often a mistake to reduce complex national issues to the level of our daily lives. But it sells. Politicians and pundits (like Stockman) will paint the larger issues in these terms for precisely that reason. Often cited arguments based on this shaky rationale: The nation's deficit spending today means "saddling" your kids with debt tomorrow. ... Fighting this war now will save your kids having to fight a bigger one tomorrow ... As a religious God-fearing man (or woman) I can be trusted to make good decisions in public office ... These people are out of work or on welfare because they lack the proper motivation (which you and I obviously possess). ... And perhaps the classic: We, the "job creators" need a tax cut now in order to create jobs for the rest of you in the future. LOL
Reply to @hank: Hello to both of you, again. I've got to come down on Hank's side on this one- it's completely simplistic to suggest that the budgetary limitations of a family unit should be extended to the financial policies of a major national entity. There are many considerations that are valid for one, but not the other.
This is not to say that I'm in personal agreement with all of the current governmental financial experiments. But here's the thing: Mr. Bernanke has an excellent perspective on what policies did not work in the 30's, and he is therefore trying a number of different approaches. When all is said and done, he also may fail, and at that point we will then have two lists of policies that we know don't work.
My hunch is that some of the things he is trying will help, and some of the other things may not. But the only way to know for sure is to try. And lord knows there's not much help from congress here, so he's being forced into areas that he might otherwise prefer not to navigate. I find it very difficult to be critical of one of the very few public servants who is putting his own tail on the line to try to get our country flying right again.
Additionally, there is a crucial distinction between "other people's money" and wealth or money which is part of our common national resources. All nations, in one way or another, have a pool of common wealth resources. To suggest that managing national resources should be identical with the good management of a family's resources is simply intellectual pandering.
Reply to @Old_Joe: Well stated OJ. But, I didn't necessarily see Catch's remark as in opposition to my ramblings. If anything, more supportive I think - and appreciated it. Just think the American people are being sold a "bill of goods" by certain well-heeled interests - in more ways than one. And felt a need to stand up on the soap box a bit. Am sure by now I've exceeded even David's considerable patience, and promise to behave better in the future. (-:
Neither of you misbehave; well, at least not here.
Other peoples money is needed for a society, or at least a modern society. Taxation is the most common form of this at all levels. This comingled money is needed to support local functions at the base levels; being police, fire dept., road repair and related. I don't have problem with any of this. However, I do expect that the monies to be as prudently spent as possible. This is where the rub comes into play; at all government levels. Not unlike most folks; I just don't like wasted monies. I was not laying a path one way or another by what I wrote, regarding opm's. I will have to take the "5th" and state that it is the season (political season) and I refrained from saying anything with much purpose or direction; so that I might leave an escape route.........
Reply to @catch22: There ya go again ... "This comingled money is needed to support local functions at the base levels; being police, fire dept., road repair". - Clearly you haven't driven on Michigan roads lately. My theory is the existing disrepair translates into a kind of "regressive" tax on the poor. Here's the logic: If tax money were actually spent maintaining our roads to proper standards, the wealthy would pay a higher proportion - even with Michigan's flat tax. (4.3% of a million dollars is more than 4.3% of $35,000.) So, let the roads go to *##*! That means each of us pays roughly the same amount replacing blown tires, broken shocks, and bent rims. Clearly an unfair & regressive tax that hits the poor harder. My take anyway!
Comments
http://www.caseyresearch.com/articles/new-economic-collapse-video-it-makes-uncomfortable-urgent-viewing
http://www.mutualfundobserver.com/discuss/Budget Director David Stockman to talk about the economy
and you can see the problem right away.
Also maybe this one?
Stockman, Bivens on Obama Stimulus, U.S. Economy
An earlier (and excellent) Casey presentation discussed how there was investment money to be made in robotics, which Mr. Casey believes is on the threshold of a major advance. This may well be true- he described at length the application of robotics in increasing, for instance, the efficiency of Amazon's distribution systems.
In the San Francisco area, the Golden Gate Bridge announced today that effective shortly they were eliminating all of the toll-takers. The state toll bridges announced that they were watching with interest, as they intend to follow if the change is successful. We also now have restaurants which have eliminated wait staff- you're supposed to order using your smart-phone, and serve yourself. Home Depot has eliminated most of their checkers/cashiers, and already some grocery chains are attempting to follow. I have also seen this technology application in Europe- they are actually a bit ahead of us in this area.
Neither Mr. Casey nor the Golden Gate Bridge directors had any suggestions for those whose jobs are about to disappear, nor did they even bother to mention that facet of the technological advance nor it's inevitable effect upon the overall economy.
I have no intention of proclaiming that all of these technological advances should be halted in the interests of job protection. But there are some really hard facts to be addressed here folks:
Between shifting low-skill production and assembly jobs "offshore", and continually eliminating other jobs by improved technology, we are creating a situation where, in plain English: there are not and will not be anywhere near the number of jobs necessary to provide enough income to allow a sufficient number of workers to lead a reasonable life and contribute tax-wise to the overall system. Sorry, but NO. Not now, not tomorrow, no matter who is president or who controls congress IT SIMPLY AIN"T GONNA WORK. Henry Ford well understood this, many years ago. It doesn't take a genius.
Yes, education and re-education will help, to some extent. But I submit that there is NO viable path forward from this situation, either short or long term. There are simply way more low-skilled individuals than there are matching jobs. If anyone can show otherwise, I would be thrilled to be proven wrong.
In terms of smartphones, people always have gone on and on about how "Best Buy is a showroom for Amazon" and I always went, naaah, there has to be people who still are just going to go in.
Well, I don't do that much shopping (I hate clothes shopping like I did when I was 5), but I was shopping for shoes the other day and decided to use my new smartphone and the Redlaser app (investment note: Redlaser is owned by Ebay, so Ebay gets a ton of information on what people are scanning, and if someone scans something in a store to buy it online and clicks through to buy it online, I'm sure Redlaser sees a %.) The store did happen to have a slightly better price with a pair of shoes that were on sale than anywhere else, but not that much was on sale - with a majority of the store, I could have probably scanned something and found a better price somewhere else. You're going to see the price comparison apps evolve and probably get to the point where if you scan something and there's a store 2 miles away or elsewhere in a mall, something will pop up and give me a coupon if I go somewhere else. I see this all eventually ending in less competition and higher prices. (Speaking of higher prices, Amazon is definitely closer to retail price on a lot of things than they used to be.)
Redlaser is a barcode scanning app that allows you to compare prices locally and online. I started doing it while shopping and although it wasn't electronic items like Best Buy, I got what people were talking about. I know so much is moving to mobile, but when you start using it more, one can really understand what people are talking about. In ways it's exciting, but it clearly is going to create some serious issues, like the ones you've noted, that aren't really being addressed or broadly talked about.
There are some apps that "get people into stores" (Shopkick, where you can get points for walking into the door at places like Target), but with Amazon's app or Redlaser, anyone can scan a product in a B & M store and buy it online.
This is why I've said before retail is overbuilt in this country, but when you start using one of these devices in a shopping experience, it's all the more apparent. The only retail REITs I'd be remotely interested in are the high-end outlet mall concept (Tanger Outlets, which I don't own, or Simon, which is overpriced) or "necessity-based" REIT Retail Opportunity Investment (which I don't own.) Otherwise, mall REITS are going to have to evolve considerably to keep up with technology and change.
Other countries are well ahead of us in terms of things like mobile payments. Visa is going to force change to new EMV chip credit cards in this country, and look at these new credit cards from Gemalto that have a little display in the credit card (!): http://www.gemalto.com/financial/cards/display_interface.html
Gemalto (which is up over 100% in the last 52 weeks) is a French company (although I believe they have a US HQ in Austin) that is a real example of where things are headed (whether you believe it to be good or bad). I'd recommend looking around their website (http://www.gemalto.com/)
As I noted in another thread, I'd also recommend watching one or two of Visa's ridiculously slick "Currency of Progress" ads to see where things are going - http://www.youtube.com/user/CurrencyofProgress
As for the discussion of robots, was actually discussing that at a family gathering. Also used the Ford reference and that really summarizes it perfectly. As you said, it doesn't take a genius.
The other thing I've really noticed is that there is much less activity in retail banking, which, in many ways, is not surprising. When you offer people no-fee accounts if they don't come into the bank... (among many other reasons.) But that is a lot of commercial property space that will no longer be needed, or at least not nearly to the same degree.
This article also goes into great detail (although I don't agree with some of the minor details) about the topic, as well. http://www.zerohedge.com/news/guest-post-inevitable-decline-retail
There is no easy answer, but endless QE and currency debasement isn't going to fix these issues (nor do I actually think they're intended to, despite all the discussion from various levels of government.) It requires actual leadership from government, which is almost entirely lacking.
There was an article the other day about a grocery store in France opening where you can shop via a phone with NFC (http://www.nfcworld.com/2012/09/12/317798/casino-to-open-worlds-first-nfc-enabled-supermarket/) NFC = Near Field Communication. My only question is, if you walk through the store scanning things to add them to your "phone cart" for when you check out, how do they know when you swipe your phone to pay at the end that you have in your cart what you indicated? Do you have people like at Costco that check your cart against a receipt? Not really here-or-there, but I was wondering how that will go.
I'm surprised there has not been more in the way of the virtual stores that Tesco put up in South Korea, where there are giant posters in subways where you can scan the items like on a grocery shelf and have them delivered. I've thought about investing in giant French ad firm JC Decaux, who also handles street furniture in many major cities around the world. Eventually, you get more and more ads with QR codes and/or NFC where people scan banners to shop, get coupons or get other information.
"Stockman: [the Keynesian theory] "is fundamentally wrong....."
I'll agree with him that it's fundamentally wrong, although there are a lot of reasons why the economy is doing how it is. No one in this government is going to address a lot of the structural issues that have built up for years and years (because it's not popular and you have a congress that can't agree on a thing - and I don't think that's an excuse to do nothing and call the other side meanies, either), so instead we have congresspeople telling Bernanke, "Get to work, Mr. Chairman" (which is completely and utterly admitting that "we are not going to do a damn thing, so you go print money.) However, given that Bernanke has no problem with running the printer 24/7 (if it's not clear from reading the Bernanke Doctrine that he worships the printing press and believes it's essentially the fix for all economic issues - read it again), he does.
QEs (and the remarkable thing to me is that there's still enormous debate on whether or not they have helped the economy when we're now on a third one that is essentially, QEInfinity, or, to use a term that will likely make it more appealing to the general public, iQE - if you get to the point where you have to do one that could theoretically go on forever, maybe it's not working) and interventions and whatnot help asset prices, although it's not a free lunch despite some people acting as if it is. Given that the top 1% owns a massive amount of the stocks and bonds in this country and the bottom 50% owns 0.5% (and that was 2007, imagine what it probably is now), you have a lot of people in this country who don't care.
Doing a QE focused on MBS helps the banks, hedge funds and the like (from highly regarded analyst Chris Whalen - "In fact, the latest Fed purchases are a gift to Fannie Mae and Freddie Mac, the TBTF banks and the hedge fund community. A fund on the floor of our offices in New York actually started dancing around like little children shouting “QE3” after the Bernanke press conference. http://www.zerohedge.com/contributed/2012-09-18/qe3-and-money-illusion")
It doesn't help the *fundamentals* of why many average people aren't buying a house. Oh, lets spend hundreds of billions to get the mortgage rate down a few basis points. Given that "median net worth of the middle class has plunged 28% since 2000 back to early 90s levels (while the upper tier class is up around 1%) and the lower tier down around 45%", (http://bloom.bg/S5daZ4), QE will just help the banks and those who own financial assets.
Or, to put it as Marc Faber does,
“Yes. Property prices in the south of the U.S. are very inexpensive compared to property prices around the world. The tragedy is that the people that were evicted from these homes have no access to credit. They have no money. They can’t buy them. So, with easy money by the Fed well-to-do people can buy these properties and then rent them out to the people that were kicked out of these homes. What a great achievement of the Fed. First they create the property bubble and destroy the wealth of poor people, then the poor people have to rent and the rents have been up over the last 12 months. What a great achievement. Thank you, Mr. Bernanke.”
As Donald Trump said on CNBC, “People like me will benefit from this.”
Beyond that, you have gotten to the point with this sort of monetary policy where many question how there will ever be an exit from it.
You also have problems with price discovery, as I noted the other day, because you have governments that continually intervene if something is not to their liking.
So, there are a lot of problems, with technology and otherwise, and I have no hope that they will even begin to be addressed by this government, whose only idea appears to be continually to tell Bernanke, in one variation or another, to "get to work" doing what he does.
Oh, and Romney wouldn't be any better, either, but that doesn't excuse anything with the current administration.
Lastly, is Romney trying to lose? I mean, WTF. If this was "Survivor" or "Big Brother", he's playing a terrible social game.
Thanks chip...I got too fancy with these new cool tools
My answer to him: "Austerity Economics" is fundamentally wrong when economic growth is slow or in recession, and the reason why the economy can't get up off the mat.
You can look at Europe has successful austerity that has been. In Reagan's time, it was a manufactured recession by Fed to break the back of inflation and they are making apples to oranges comparisons. The situation we have here is more like great depression. Before Keynesian stimulus was tried, nations around that time also tried Austerity and it did not work. Austerity in such great deflations cause to the race to bottom and much of the economy has to be destroyed before rebuild can happen. Human toll is great and especially painful for lower and middle classes.
Also, I consider this as a political post (and interview as political interview) since these folks has no problem increasing deficits and growing entitlements during Bush years.
My point is that NONE of these geniuses seem to acknowledge that we now have a major permanent systemic unemployment problem due to the mismatch in worker intelligence, education, native technological ability and skill sets.
Education and retraining can help here to a limited extent, but surely not enough to make a major dent. Every job that disappears due to "increased efficiency" is one less consumer able to purchase all of this efficiently manufactured stuff. And as we all know, consumers purchasing ever-increasing amounts of stuff is the vital underpinning of the whole damned economic structure. There simply has to be a "tipping point" in this equation, and I loved the way Stockman glossed over that aspect of the issue.
Again referring to the earlier Casey presentation, it was noted that robots are now even replacing nurses in some aspects of hospital services, and that this technology is already being employed in at least 100 European hospitals. The further up the skill set chain technology goes, the worse the human displacement is going to get. Does anyone seriously think that some entirely new industry requiring large numbers of low-skilled workers is going to appear to take care of this?
That would be likely to some degree because they don't care.
Not to be extraordinarily cynical, but it has to become apparent at some point that the issues you discuss and issues revolving around it are - despite all the "talk" to the contrary - clearly not a priority to "these geniuses" or even those who are in a position to do a thing about it.
Anyone who believes that either side gives two bleeps about what's left of the middle class is delusional.
We have spent obscene amounts of money (in good times, bad times) over the last 30-40 years and gone into a ridiculous situation with debt, much of which can likely never be paid off. Rather than face that situation in the slightest (bailing out and propping up is not facing anything or letting the system clear), we choose to instead go "QE to infinity" in an apparent attempt to - among other things - pay off the debt with cheaper and cheaper dollars over time.
So the solution to 30-40 years of obscene spending is throwing enormous (historic, even) amounts of money at the problem (to the point where one has practically changed the psychology of money so that amounts that would have stunned the public not that long ago now get a shrug) so that we can hope the problem goes away and that we can get back as quickly as possible to 30-40 more years of obscene spending.
What was that quote from Tocqueville? "“The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” Yeah, that was the one. Why do anything difficult or stop promising stuff to the public that could be short-term unpopular but could do long-term good? "Get to work, Mr Bernanke", says congressfolk (so that you can make it easy for us congressfolk not to.)
You can't have congress doing nothing and just telling Bernanake to go print some more money. THAT DOESN'T WORK. Sorry, but our government actually has to do something - you can't just have constant Fed interventions and "hope that shoos the problems away." It won't, and beyond that, it could make some problems worse and cause new ones.
If we are going to buy and print our way out of every blip of a recession that comes along from here on out (which clearly seems to be the plan), gee, why didn't we think of this before? Buying our way out of having to face any economic problems. Ever. Because history has shown that has worked out really well.
Those who own stocks and bonds are pleased and they will likely be more pleased over time and be able to stay ahead of inflation to whatever degree they have in risk.
However, for the bottom 50% that own literally about 0.5% of the stocks and bonds, QE does not really fix anything of note, like the issues you discuss.
It's trying to reinflate without actually making the difficult decisions of fixing structural problems. It hasn't lead to a sustainable recovery and we will now have "open-ended" QE for a very. very. long. time.
All this (what you discuss, what I discuss, etc) will, however, likely eventually lead to some degree of social instability/unrest down the road.
Actual, you know, thought and decisions *begin* to fix the issues you are talking about. The problems you are talking about take real decisions, thought and leadership. That is not happening, nor will it. (It wouldn't happen under Romney either, although that won't happen because I'm starting to think he's trying to lose the election.)
You have an economy that has effectively been an instance of trying to cure a cancer patient with plastic surgery. They may look good on the outside, but doctors have addressed absolutely none of the structural/core problems and then the doctors wonder why the patient still has lingering cancer.
Sorry, you aren't going to fix the structural problems overnight. They are going to be difficult and take a very long time to fix, and that's just more time than anyone who has the power to wants to spend on that, especially when they want to get re-elected. . Still, you aren't going to get a sustainable recovery (you know, one that doesn't require iQE) until the structural issues are addressed. The longer it takes to even begin to address them, the bigger the task of fixing them. And, well, no one in government wants to do anything. So, there we are and here we'll be.
That involves tough decisions and the excuse that no one on the other side wants to work together so everyone's just going to sit on their f'ing hands and yell at Bernanke to do something.
You have a political system that's a complete mess, and absolutely none of your concerns are going to be addressed until they absolutely have to.
And by that point, who knows.
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Oh, and just to throw in more hilarity regarding Romney and his terrible social game, his co-chairman (former gov Tim Pawlenty) just left the campaign and went to go lobby for Wall Street.
http://www.wfaa.com/news/national/170494166.html
By the way, David Stockman does not like much of the direction of today's conservatives.
Each will have his or her own view of "Reaganomics", as Ronald Reagan's economic leadership came to be known. Mine fall along 3 lines. (1) Regan fired the nation's striking PATCO workers (air traffic controllers) and replaced them with non-union workers. His actions signaled the start of an attack on organized labor that has continued to the present - the latest salvo being the outlawing of collective bargaining by public employees in Wisconsin. (2) Reagan's first term was marked by the deepest, most severe recession of the post-war period. (3) Reagan's term in office oversaw record federal deficits for that day - largely due to a sharp buildup of U.S. military forces. -
In private business Stockman was less than remarkable. He lost $13 million personally running a company that eventually went bankrupt - causing large losses for others as well. Both civil and criminal charges were brought against him in connection with this, but later dropped. --- My own economic leanings based on prior readings and experiences leads me to side more with Nobel Prize winning economist Paul Krugman as regards the financial challenges facing our nation. I'm not able to articulate those views nearly as well as he can, so am linking one Paul Krugman interview, along with the Wikipedia article from which some of my material was drawn. I will say that sometimes the "instinctive" action isn't necessarily the correct one. Stockman's call for austerity will ring true with some: "You can't run a household this way!" However, you probably could - and maybe should - under certain circumstances if you coined your own money, made your own laws, had power to levy taxes, enter into treaties and wage war - among other sovereign powers and unique responsibilities.
How to Fix the Economy - and Why It's Easier than You Think - Paul Krugman
http://www.rollingstone.com/politics/blogs/national-affairs/paul-krugman-on-how-to-fix-the-economy-and-why-its-easier-than-you-think-20120502
Wikipedia - David Stockman
http://en.wikipedia.org/wiki/David_Stockman
This part, ain't it true......... 'Course, this is part of the disconnect between a large centralized operation; and also extends to congress/senate folks. When spending "opm", other peoples money; the lines may become blurred and even more difficult to determine whether an expected outcome came close to any targeted purpose. A grand economic experiment surrounds all of us, today.
Thank you and take care,
Catch
As I said earlier, I think it's often a mistake to reduce complex national issues to the level of our daily lives. But it sells. Politicians and pundits (like Stockman) will paint the larger issues in these terms for precisely that reason. Often cited arguments based on this shaky rationale: The nation's deficit spending today means "saddling" your kids with debt tomorrow. ... Fighting this war now will save your kids having to fight a bigger one tomorrow ... As a religious God-fearing man (or woman) I can be trusted to make good decisions in public office ... These people are out of work or on welfare because they lack the proper motivation (which you and I obviously possess). ... And perhaps the classic: We, the "job creators" need a tax cut now in order to create jobs for the rest of you in the future. LOL
This is not to say that I'm in personal agreement with all of the current governmental financial experiments. But here's the thing: Mr. Bernanke has an excellent perspective on what policies did not work in the 30's, and he is therefore trying a number of different approaches. When all is said and done, he also may fail, and at that point we will then have two lists of policies that we know don't work.
My hunch is that some of the things he is trying will help, and some of the other things may not. But the only way to know for sure is to try. And lord knows there's not much help from congress here, so he's being forced into areas that he might otherwise prefer not to navigate. I find it very difficult to be critical of one of the very few public servants who is putting his own tail on the line to try to get our country flying right again.
Additionally, there is a crucial distinction between "other people's money" and wealth or money which is part of our common national resources. All nations, in one way or another, have a pool of common wealth resources. To suggest that managing national resources should be identical with the good management of a family's resources is simply intellectual pandering.
Neither of you misbehave; well, at least not here.
Other peoples money is needed for a society, or at least a modern society. Taxation is the most common form of this at all levels. This comingled money is needed to support local functions at the base levels; being police, fire dept., road repair and related. I don't have problem with any of this. However, I do expect that the monies to be as prudently spent as possible. This is where the rub comes into play; at all government levels. Not unlike most folks; I just don't like wasted monies.
I was not laying a path one way or another by what I wrote, regarding opm's. I will have to take the "5th" and state that it is the season (political season) and I refrained from saying anything with much purpose or direction; so that I might leave an escape route.........
Please vote for me, early and often. I thank you.
Take care of you and yours,
Catch