- Mind Control as a method to support the US Dollar
There is a paradox of capitalism, we’ve reached a point where those at the top, have an unlimited budget to maintain the status quo, increase their wealth, and develop an ever increasing sophistocated toolbox to manage empire and maintain their dominance. As we explain in Splitting Pennies – this is no where more obvious than Forex. The last 100 years we’ve seen capitalism evolve brightly. Industries that shouldn’t be industries, now employ millions of workers. Paradigm shift, revolution, can now be artificially created by means of automated computer algorithm. The political process, has been hacked by this technology. And it’s all controlled by a central banking Elite – it’s all controlled by THEY (Them). At the top of the pyramid of society, groups such as the CIA, MI6, KGB, Mossad, and others – are responsible for maintaining safety and security, that is, from change. They cull the herd when necessary, whether it be a revolution in Libya, or bringing down the twin towers. But these are all physical ops, their most important missions are the ones least talked about – that is, PsyOps, and most significantly, PsyOps that support the financial system. I believe that if ZH readers can understand this matrix, it will help make better more objective investing decisions. Because although the market is a free entropic environment, it is controlled by humans, by institutions, and well – it’s only free when it’s allowed to be free. These PsyOps are what make such a state of hypocrisy possible – otherwise, people would ‘wake up’ and realize that we are programmed with oxi moron hypocrisy. “We had to bomb the village to save it.” The tools they use to implement mind control are very simple and have been around for 50 years – the most successful one is Television (TV). According to testimony by CIA analyst who was involved in domestic PsyOps, he said when asked how can the average person avoid such programming, “Unplug your TV.” In case you aren’t aware of modern mind control techniques, checkout this well compiled article by Activist Post about 10 methods commonly used.
The connection between the global social control paradigm and the US Dollar runs deep. In support of the US Dollar, it’s important that people are blindly hypnotised into submission by using US Dollars. This is more important than any Fed operations to prop the markets. Because ultimately, the only real threat to the US Dollar is if people start THINKING. At the end of the day, the US Dollar, like any fiat currency, provides a basic accounting service for economic activity. Never before in history has a single currency enjoyed such widespread global use. And the marketing and propoganda campaigns in support of the USD support it more than the Petro Dollar system, more than CIA operations in Switzerland, and more than any financial algorithm employed by groups such as the Plunge Protection Team (PPT). Understanding something, isn’t criticizing – maybe it’s a good thing, maybe not – it’s not for the teacher to make any conclusive opinion. It is however something that all investors should be aware of, especially those who are subject to daily Neuro Linguistic Programming (NLP) in support of this financial system. Why is Hollywood so successful? Because they make magic – they make the artificial, seem real… if only for a few moments, it is enough to rewire your brain, already filled with advertising, chemicals in the food, air, and water, and various radio and radiation pumped into populated areas. The Fed, controlled by a similar group of people like Hollywood is, also makes magic. They make people believe in this paper they print numbers on called “Federal Reserve Notes” – even though it’s backed by nothing. US Dollars are only backed by BELIEF and FAITH in them – which is why Mind Control – or in more plain language, aggressive advertising; is necessary to support the US Dollar.
Maybe watching some of these lunatics that have coined phrases such as “King Dollar” are enough for the average busy businessman to be lulled into a sense of semi-consciousness, where rational, objective thought is impossible. Buy buy buy.. drill drill drill.. Investors are whipped into a bullish frenzy easily with such programming. They meet the first criteria – they are open to it. Admitting you have a problem, is step number one. The mind is like a parachute, you must open to use. Not only that, they actually want to hear what TV personalities want to say, to help them make investing decisions! I remember when I learned Bill OReilly wrote a book – I was shocked. I didn’t think that someone with his mental disability could even read – let alone write! (Still, I’m not sure he actually wrote any book, probably he hired someone to do it.) Anyway, this guy is a great example of someone who fits the role needed to be played perfectly – slightly mentally retarded, aggressive abrasive personality, with a lot of opinions about meaningless issues that will guarantee that it is impossible to receive any valuable information by watching such a program.
So how does this all work? Clearly, the Elite have decided that financial services – it’s not for the people. People should work hard, obey, consume, watch sports, and watch TV, and eat, and drink.. So they embed advertising in subtle ways, when discussing financial issues. For example, during the 911 commission reports and investigation, there’s no mention of the post 911 US Dollar, or transactions that took place short USD just before 911. There’s a little talk about PUT options on UAL but they’ve tried confusing the issue by releasing snopes reports that its a myth, even though you can see what really happened here:
FTW, October 9, 2001 – Although uniformly ignored by the mainstream U.S. media, there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades — which has left a $2.5 million prize unclaimed — the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency. Until 1997 A.B. “Buzzy” Krongard had been Chairman of the investment bank A.B. Brown. A.B. Brown was acquired by Banker’s Trust in 1997. Krongard then became, as part of the merger, Vice Chairman of Banker’s Trust-AB Brown, one of 20 major U.S. banks named by Senator Carl Levin this year as being connected to money laundering. Krongard’s last position at Banker’s Trust (BT) was to oversee “private client relations”. In this capacity he had direct hands-on relations with some of the wealthiest people in the world in a kind of specialized banking operation that has been identified by the U.S. Senate and other investigators as being closely connected to the laundering of drug money.
Krongard (re?) joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.
No mention of Forex – no USD short. No reports about the missing Gold from the Fed depository, which was at Ground Zero. This type of subtle manipulation goes on today. It’s not what they say, it’s what they don’t say. As long as the American population is fat, happy, and stupid – they will be happy to use US Dollars, which continually decline in value. Alternatives such as community currencies, gold, Bitcoin, and others – which are readily available for use – should be avoided at all costs. Most Americans aren’t even aware that other currencies exist. As we explain in our book Splitting Pennies – this brainwashing of the domestic population is critical to the global advertising campaign that supports the US Dollar. The USD is the one world currency. The Euro, backed by USD and run by CIA agent “Super Mario” – is simply the other side of the same coin.
The goal of this programming is simple – don’t question the US Dollar. It’s not about convincing people to buy USD in a Forex account. In fact, they’re betting that by not questioning the value of the USD or questioning the USD as an accounting functional currency, people aren’t going to want to trade Forex, where they can potentially hedge themselves from Forex exposure, or even make a fortune on Forex like Stan did. What’s the point of this article? Turn off your TV, or just obey.
They are investing billions to control your mind. All they want is your time. Just a few moments of your time. It’s all they need. Who cares, whatever, nevermind.
- For Russia & China, It's "Accept American Hegemony" Or "Go To War"
Authored by Paul Craig Roberts,
Somnolent Europe, Russia, and China – Can the world wake up?
“Declassified American government documents show that the US intelligence community ran a campaign in the Fifties and Sixties to build momentum for a united Europe. It funded and directed the European federalist movement.
“The documents confirm suspicions voiced at the time that America was working aggressively behind the scenes to push Britain into a European state. One memorandum, dated July 26, 1950, gives instructions for a campaign to promote a fully fledged European parliament. It is signed by Gen. William J. Donovan, head of the American wartime Office of Strategic Services, precursor of the CIA.”
The documents show that the European Union was a creature of the CIA.
As I have previously written, Washington believes that it is easier to control one government, the EU, than to control many separate European governments. As Washington has a long term investment in orchestrating the European Union, Washington is totally opposed to any country exiting the arrangement. That is why President Obama recently went to London to tell his lapdog, the British Prime Minister, that there could be no British exit.
Like other European nations, the British people were never allowed to vote on whether they were in favor of their country ceasing to exist and them becoming Europeans. British history would become the history of a bygone people like the Romans and Babylonians.
The oppressive nature of unaccountable EU laws and regulations and the EU requirement to accept massive numbers of third world immigrants have created a popular demand for a British vote on whether to remain a sovereign country or to dissolve and submit to Brussels and its dictatorial edicts. The vote is scheduled for June 23.
Washington’s position is that the British people must not be permitted to decide against the EU, because such a decision is not in Washington’s interest.
The prime minister’s job is to scare the British people with alleged dire consequences of “going it alone.” The claim is that “little England” cannot stand alone. The British people are being told that isolation will spell their end, and their country will become a backwater bypassed by progress. Everything great will happen elsewhere, and they will be left out.
If the fear campaign does not succeed and the British vote to exit the EU, the open question is whether Washington will permit the British government to accept the democratic outcome.
Alternatively, the British government will deceive the British people, as it routinely does, and declare that Britain has negotiated concessions from Brussels that dispose of the problems that concern the British people.
Washington’s position shows that Washington is a firm believer that only Washington’s interests are important. If other peoples wish to retain national sovereignty, they are simply being selfish. Moreover, they are out of compliance with Washington, which means they can be declared a “threat to American national security.” The British people are not to be permitted to make decisions that do not comply with Washington’s interest. My prediction is that the British people will either be deceived or overridden.
It is Washington’s self-centeredness, the self-absorption, the extraordinary hubris and arrogance, that explains the orchestrated “Russian threat.” Russia has not presented herself to the West as a military threat. Yet, Washington is confronting Russia with a US/NATO naval buildup in the Black Sea, a naval, troop and tank buildup in the Baltics and Poland, missile bases on Russia’s borders, and plans to incorporate the former Russian provinces of Georgia and Ukraine in US defense pacts against Russia.
When Washington, its generals and European vassals declare Russia to be a threat, they mean that Russia has an independent foreign policy and acts in her own interest rather than in Washington’s interest. Russia is a threat, because Russia demonstrated the capability of blocking Washington’s intended invasion of Syria and bombing of Iran. Russia blunted one purpose of Washington’s coup in the Ukraine by peacefully and democratically reuniting with Crimera, the site of Russia’s Black Sea naval base and a Russian province for several centuries.
Perhaps you have wondered how it was possible for small countries such as Iraq, Libya, Syria, Yeman, and Venezuela to be threats to the US superpower. On its face Washington’s claim is absurd. Do US presidents, Pentagon officials, national security advisors, and chairmen of the Joint Chiefs of Staff really regard countries of so little capability as military threats to the United States and NATO countries?
No, they do not. The countries were declared threats, because they have, or had prior to their destruction, independent foreign and economic policies. Their policy independence means that they do not or did not accept US hegemony. They were attacked in order to bring them under US hegemony.
In Washington’s view, any country with an independent policy is outside Washington’s umbrella and, therefore, is a threat.
Venezuela became, in the words of US President Obama, an “unusual and extraordinary threat to the national security and foreign policy of the United States,” necessitating a “national emergency” to contain the “Venezuelan threat” when the Venezuelan government put the interests of the Venezuelan people above those of American corporations.
Russia became a threat when the Russian government demonstrated the ability to block Washington’s intended military attacks on Syria and Iran and when Washington’s coup in the Ukraine failed to deliver to Washington the Russian Black Sea naval base.
Clearly Venezuela cannot possibly pose a military threat to the US, so Venezuela cannot possibly pose an “unusual and extraordinary threat to the national security of the US.” Venezuela is a “threat” because the Venezuelan government does not comply with Washington’s orders.
It is absolutely certain that Russia has made no threats whatsoever against the Baltics, Poland, Romania, Europe, or the United States. It is absolutely certain that Russia has not invaded the Ukraine. How do we know? If Russia had invaded Ukraine, the Ukraine would no longer be there. It would again be a Russian province where until about 20 years ago Ukraine resided for centuries, for longer than the US has existed. Indeed, the Ukraine belongs in Russia more than Hawaii and the deracinated and conquered southern states belong in the US.
Yet, these fantastic lies from the highest ranks of the US government, from NATO, from Washington’s British lackeys, from the bought-and-paid-for Western media, and from the bought-and-paid-for EU are repeated endlessly as if they are God’s revealed truth.
Syria still exists because it is under Russian protection. That is the only reason Syria still exists, and it is also another reason that Washington wants Russia out of the way.
Do Russia and China realize their extreme danger? I don’t think even Iran realizes its ongoing danger despite its close call.
If Russia and China realize their danger, would the Russian government permit one-fifth of its media to be foreign owned? Does Russia understand that “foreign owned” means CIA owned? If not, why not? If so, why does the Russian government permit its own destabilization at the hands of Washington’s intelligence service acting through foreign owned media?
China is even more careless. There are 7,000 US-funded NGOs (non-governmental organizations) operating in China. Only last month did the Chinese government finally move, very belatedly, to put some restrictions on these foreign agents who are working to destabilize China. The members of these treasonous organizations have not been arrested. They have merely been put under police watch, an almost useless restriction as Washington can provide endless money with which to bribe the Chinese police.
Why do Russia and China think that their police are less susceptible to bribes than Mexico’s or American police? Despite the multi-decade “war on drugs,” the drug flow from Mexico to the US is unimpeded. Indeed, the police forces of both countries have a huge interest in the “war on drugs” as the war brings them riches in the form of bribes. Indeed, as the crucified reporter for the San Jose Mercury newspaper proved many years ago, the CIA itself is in the drug-running business.
In the United States truth-tellers are persecuted and imprisoned, or they are dismissed as “conspiracy theorists,” “anti-semites,” and “domestic extremists.” The entire Western World consists of a dystopia far worse than the one described by George Orwell in his famous book, 1984.
That Russia and China permit Washington to operate in their media, in their universities, in their financial systems, and in “do-good” NGOs that infiltrate every aspect of their societies demonstrates that both governments have no interest in their survival as independent states. They are too scared of being called “authoritarian” by the Western presstitute media to protect their own independence.
My prediction is that Russia and China will soon be confronted with an unwelcome decision: accept American hegemony or go to war.
NOTE: The Saker’s take on Russian media openness to Western anti-Russian propaganda.
- Japan's "Coma Economy" Is A Preview For The World
The 1980s were the apex of Japanese culture and economic might. Back then, Japan’s economy was growing so fast, it was thought they would overtake the US. But that all came to a screeching halt. Truth is, Japan’s meteoric rise was fueled by an epic lending bubble. Similar to the Roaring 20s in America.
And when the bubble popped, the government launched massive and misguided measures that set Japan back decades. Their economy hasn’t expanded since. They are stuck in the 1980s. There’s been no growth for 30 years. And as Mike Maloney and Harry Dent explain, the United States could be going down the same path…
“For more than 20 years now, Japan has proved that Keynesian economics does not work… they’ve tried to print their way to prosperity… and failed…they didn’t let the reset happen…”
- The Next Big Bailout? Treasury Rejects Proposal To Cut Pension Benefits
UPS, and roughly 270,000 retired truck drivers, construction workers, and other service workers can breathe a collective sigh of relief… for now. As we previously reported, the Central States Pension Fund had submitted a plan to Treasury that if approved would have cut member benefits, and triggered UPS to take an estimated $3.8 billion charge.
As the WSJ reports, Kenneth Feinberg (who was appointed by the Treasury to review all such applications) rejected the plan presented by the CSPF. Feinberg cited a few reasons for his decision, one being that it imposed cuts in a disproportionate manner, another was that the notifications sent to participants were too technical to be understood, but namely Feinberg didn't agree with the assumption that the fund would achieve 7.5% yearly investment returns going forward. Those returns "were too optimistic and unreasonable" Feinberg said.
"You get to breathe again, you get to exhale. Our life was on hold." said Bill Orms, a 69 year-old retired truck driver from Akron, Ohio who would have seen his $2,400 a month benefit cut in half had the proposal been accepted.
Absent an injection of funds or benefit cuts, the fund which pays out $2.8 billion in benefits a year will be insolvent within ten years according to Thomas Nyhan, the plan's executive director. Nyhan added that he was "disappointed" by the Treasury's decision. According to the WSJ, the fund currently has $16.8 billion in assets against $35 billion in liabilities, and has roughly one active worker contributing to the fund for every four retirees that draw from it.
So we're now back to where we started. The Central States Pension Fund will by its own estimates be insolvent within ten years, and the government safety net, the Pension Benefit Guaranty Corp cannot be counted on to pick up the benefits because it too is well on its way to insolvency.
If the Treasury won't allow any pension cuts, and the government created safety net won't be there to keep the benefits flowing, how will the cash continue to flow to members? With the precedent now set by the Treasury that no cuts will be allowed, the answer will likely come in the form of a massive bailout.
- Trumped! Why It Happened And What Comes Next, Part 3 – The Jobs Deal
Submitted by David Stockman via Contra Corner blog,
Donald Trump’s patented phrase “we aren’t winning anymore” lies beneath the tidal wave of anti-establishment sentiment propelling his campaign and, to some considerable degree, that of Bernie Sanders, too.
As we demonstrated in Part 1, and Part 2, what’s winning is Washington, Wall Street and the bicoastal elites. The latter prosper from finance, the LA and SF branches of entertainment ( movies/TV and social media, respectively) and the great rackets of the Imperial City – including the military/industrial/surveillance complex, the health and education cartels, the plaintiffs and patent bar, the tax loophole farmers and the endless lesser K-Street racketeers.
But most of America’s vast flyover zone has been left behind. Thus, the bottom 90% of families have no more real net worth today than they had 30 years ago and earn lower real household incomes and wages than they did 25 years ago.
Needless to say, the lack of good jobs lies at the bottom of the wealth and income drought on main street, and this week’s April jobs report provided still another reminder.
During the last three months goods-producing jobs have been shrinking again, even as the next recession knocks on the door. These manufacturing, construction and energy/mining jobs are the highest paying in the US economy and average about $56,000 per year in cash wages. Yet it appears that the 30 year pattern shown in the graph below——lower lows and lower highs with each business cycle—-is playing out once again.
So even as the broadest measure of the stock market—-the Wilshire 5000—–stands at 11X its 1989 level, there are actually 22% fewer goods producing jobs in the US than there were way back then.
This begs the question, therefore, as to the rationale for the Jobs Deal we referenced in Part 1, and why Donald Trump should embrace a massive swap of the existing corporate and payroll taxes for new levies on consumption and imports.
The short answer is that Greenspan made a giant policy mistake 25 years ago that has left main street households buried in debt and stranded with a simultaneous plague of stagnant real incomes and uncompetitively high nominal wages. It happened because at the time that Mr. Deng launched China’s great mercantilist export machine during the early 1990s, Alan Greenspan was more interested in being the toast of Washington than he was in adhering to his lifelong convictions about the requisites of sound money.
Indeed, he apparently checked his gold standard monetary princples in the cloak room when he entered the Eccles Building in August 1987. Not only did he never reclaim the check, but, instead, embraced the self-serving institutional anti-deflationism of the central bank.
This drastic betrayal and error resulted in a lethal cocktail of free trade and what amounted to free money. It resulted in the hollowing out of the American economy because it prevented American capitalism from adjusting to the tsunami of cheap manufactures coming out of China and its east Asian supply chain.
So what would have happened in response to the so-called “china price” under a regime of sound money in the US?
The Fed’s Keynesian economists and their Wall Street megaphones would never breath a word of it, of course, because they have a vested interest in perpetuating inflation. It gives inflation targeting central bankers the pretext for massive intrusion in the financial markets and Wall Street speculators endless bubble finance windfalls.
But the truth is, sound money would have led to falling consumer prices, high interest rates and an upsurge of household savings in response to strong rewards for deferring current consumption. From that enhanced flow of honest domestic savings the supply side of the American economy could have been rebuilt with capital and technology designed to shrink costs and catalyze productivity.
But instead of consumer price deflation and a savings-based era of supply side reinvestment, the Greenspan Fed opted for a comprehensive Inflation Regime. That is, sustained inflation of consumer prices and nominal wages, massive inflation of household debt and stupendous inflation of financial assets.
To be sure, the double-talking Greenspan actually bragged about his prowess in generating something he called “disinflation”. But that’s a weasel word. What he meant, in fact, was that the purchasing power of increasingly uncompetitive nominal American wages was being reduced slightly less rapidly than it had been in the 1980s.
Still, the consumer price level has more than doubled since 1987, meaning that prices of goods and services have risen at 2.5% per year on average. Notwithstanding all the Fed’s palaver about “low-flation” and undershooting its phony 2% target, American workers have had to push their nominal wages higher and higher just to keep up with the cost of living.
But in a free trade economy the wage-price inflation treadmill of the Greenspan/Fed was catastrophic. It drove a wider and wider wedge between US wage rates and the marginal source of goods and services supply in the global economy.
That is, US production was originally off-shored owing to the China Price with respect to manufactured goods. But with the passage of time and spread of the central bank driven global credit boom, goods and services were off-shored to places all over the EM. The high nominal price of US labor enabled the India Price, for example, to capture massive amounts of call center activity, engineering and architectural support services, financial company back office activity and much more.
At the end of the day, it was the Greenspan Fed which hollowed out the American economy. Without the massive and continuous inflation it injected into the US economy, nominal wages would have been far lower, and on the margin far more competitive with the off-shore.
That’s because there is a significant cost per labor hour premium for off-shoring in terms of a 12,000 mile pipeline of transportation charges, logistics control and complexity, increased inventory carry in the supply chain, quality control and reputation protection expenses, average productivity per worker, product delivery and interruption risk and much more.
In a sound money economy of falling nominal wages and even more rapidly falling consumer prices, American workers would have had a fighting chance to remain competitive, given this significant off-shoring premium. But the demand-side Keynesians running policy at the Fed and US treasury didn’t even notice that their wage and price inflation policy functioned to override the off-shoring premium, and to thereby send American production and jobs fleeing abroad.
Indeed, they actually managed to twist this heavy outflow of goods and services production into what they claimed to be an economic welfare gain in the form of higher corporate profits and lower consumer costs.
Needless to say, the basic law of economics—-Say’s Law of Supply—-says societal welfare and wealth arise from production; spending and demand follow output and income.
By contrast, our Keynesian central bankers claim prosperity flows from spending, and they had a ready solution for the gap in spending that initially resulted when jobs and incomes were sent off-shore.
The de facto solution of the Greenspan Fed was to supplant the organic spending power of lost production and wages with a simulacrum of demand issuing from an immense and contiunuous run-up of household debt. Accordingly, what had been a steady 75-80% ratio of household debt to wage and salary income before 1980 erupted to 220% by the time of Peak Debt in 2007.
The nexus between household debt inflation and the explosion of Chinese imports is hard to miss. Today monthly Chinese imports are 75X larger than the were when Greenspan took office in August 1987.
At the same time, American households have buried themselves in debt, which has rising from $2.7 trillion or about 80% of wage and salary income to $14.2 trillion. Even after the financial crisis and supposed resulting deleveraging, the household leverage ratio is still in the nosebleed section of history at 180% of wage and salary earnings.
Stated differently, had the household leverage ratio not been levitated in the nearly parabolic fashion shown below, total household debt at the time of the financial crisis would have been $6 trillion, not $14 trillion. In effect, the inflationary policies of the Greenspan Fed and its successors created a giant hole in the supply side of the US economy, and then filled it with $8 trillion of incremental debt which remains an albatross on the main street economy to this day.
Then again, digging holes and refilling them is the essence of Keynesian economics.
Household Leverage Ratio – Click to enlarge
At the end of the day, the only policy compatible with Greenspan’s inflationary monetary regime was reversion to completely managed trade and a shift to historically high tariffs on imported goods and services. That would have dramatically slowed the off-shoring of production, and actually also would have remained faithful to the Great Thinker’s economics. After all, in 1931 Keynes turned into a vociferous protectionist and even wrote an ode to the virtues of “homespun goods”.
Alas, inflation in one country behind protective trade barriers doesn’t work either, as was demonstrated during the inflationary spiral of the late 1960s and 1970s. That’s because easy money does lead to a spiral of rising domestic wages and prices owing to too much credit based spending; and this spiral eventually soars out of control in the absence of the discipline imposed by lower-priced foreign goods and services.
In perverse fashion, therefore, the Greenspan Fed operated a bread and circuses economy. Unlimited imports massively displaced domestic production and incomes—even as they imposed an upper boundary on the rate of CPI gains.
The China Price for goods and India Price for services, in effect, throttled domestic inflation and prevented a runaway inflationary spiral. In the face of ever increasing credit-funded US household demand, there was virtually unlimited labor and production supply available from the rice paddies and agricultural villages of the EM.
Free trade also permitted many companies to fatten their profits by arbitraging the wedge between Greenspan’s inflated wages in the US and the rice paddy wages of the EM. Indeed, the alliance of the Business Roundtable and the Keynesian Fed in behalf of free money and free trade is one of history’s most destructive arrangements of convenience.
In any event, the graph below nails the story. During the 29 years since Greenspan took office, the nominal wages of domestic production workers have soared, rising from $9.22 per hour in August 1987 to $21.26 per hour at present. It was this 2.3X leap in nominal wages, of course, that sent jobs packing for China, India and the EM.
At the same time, the inflation-adjusted wages of domestic workers who did retain there jobs went nowhere at all.
That’s right. There were tens of millions of jobs off-shored, but in constant dollars of purchasing power, the average production worker wage of $383 per week in mid-1987 has ended up at $380 per week 29 years later
During the span of that 29 year period the Fed’s balance sheet grew from $200 billion to $4.5 trillion. That’s a 23X gain during less than an average working lifetime. Greenspan claimed he was the nation’s savior for getting the CPI inflation rate down to around 2% during his tenure; and Bernanke and Yellen have postured as would be saviors owing to their strenuous money pumping efforts to keep it from failing the target from below.
But 2% inflation is a fundamental Keynesian fallacy, and the massive central bank balance sheet explosion which fueled it is the greatest monetary travesty in history. Dunderheads like Bernanke and Yellen say 2% inflation is just fine because under their benign monetary management everything comes out in the wash at the end——-wages, prices, rents, profits, living costs and indexed social benefits all march higher together with tolerable leads and lags.
No they don’t. Jobs in their millions march away to the off-shore world when nominal wages double and the purchasing power of the dollar is cut in half over 29 years.
These academic fools apparently believe they live in Keynes’ imaginary homespun economy of 1931!
The evident economic distress in the flyover zone of America and the Trump voters now arising from it in their tens of millions are telling establishment policy makers that they are full of it; that they have had enough of free trade and free money.
What can be done now?
The solution lies in the contra-factual to the Greenspan/Fed Inflation Regime. Under sound money, the balance sheet of the Fed would still be $200 billion, household debt would be a fraction of its current level, the CPI would have shrunk 1-2% per year rather than the opposite and nominal wages would have shrunk by slightly less. But real wages would be far higher than the $380 per week shown above and good jobs in both goods and services would be far more plentiful than reported last Friday by the BLS.
Needless to say, the clock cannot be turned back, and a resort to Keynes’ out-and-out protectionism in the context of an economy that suckles on nearly $3 trillion of annual goods and services imports is a non-starter. It would wreak havoc beyond imagination.
But it is not too late to attempt the second best in the face of the giant historical detour from sound money that has soured the practice of free trade. To wit, public policy can undo some of the damage by sharply lowering the nominal price of domestic wages and salaries in order to reduce the cost wedge versus the rest of the world.
It is currently estimated that during 2016 social insurance levies on employers and employees will add a staggering $1.8 trillion to the US wage bill. Most of that represents social security and medicare payroll taxes at the Federal level, along with state unemployment insurance taxes that are induced by Federal policy.
The single greatest things that could be done to shrink the Greenspan/Fed nominal wage wedge, therefore, is to rapidly phase out all payroll taxes, and thereby dramatically improve the terms of US labor trade with China and the rest of the EM world. Given that the nation’s total wage bill (including benefit costs) is about $10 trillion, elimination of Federal payroll taxes would amount to a 11% cut in the cost of US labor.
On the one hand, such a bold move would also dramatically elevate actual main street take-home pay owing to the fact that half of the payroll tax levy is extracted from worker pay packets in advance.
Moreover, elimination of payroll taxes would be far more efficacious from a political point of view in Trump’s flyover zone constituencies. That’s because nearly 160 million Americans pay social insurance taxes compared to less than 50 million who actually pay any net Federal income taxes after deductions and credits.
At the same time, elimination of Federal payroll taxes would reduce the direct cost of labor to domestic business by upwards of $575 billion per year. And as we have proposed in the Jobs Deal, the simultaneous elimination of the corporate income tax would reduce the burden on business by another $350 billion annually.
Zeroing-out the corporate income tax happens to be completely appropriate and rational in today’s globalized economy in its own right. The corporate tax has always posed an insuperable challenge to match business income and expense during any arbitrary tax period, anyway. But in a globalized economy in which capital is infinitely mobile on paper as well as in fact, the attempt to collect corporate profits taxes in one country is pointless and impossible.
It simply gives rise to massive accounting and legal maneuvers such as the headline grapping tax inversions of recent years. Yet notwithstanding 75,000 pages of IRS code and multiples more of that in tax rulings and litigation, corporate tax departments will always remain one step ahead of the IRS. That is, the corporate tax generates immense deadweight economic costs and dislocation—including a huge boost to off-shoring of production to low tax havens——while generating a meager harvest of actual revenues.
Last year, for example, corporate tax collections amounted to just 1.8% of GDP compared to upwards of 9% during the heyday of the American industrial economy during the 1950s.
Needless to say, you don’t have to be a believer in supply side miracles to agree that a nearly $1 trillion tax cut on American business from the elimination of payroll and corporate income taxes would amount to the mother of all jobs stimulus programs!
Self-evidently, the approximate $1.5 trillion revenue loss at the Federal level from eliminating these taxes would need to be replaced. We are not advocating any Laffer Curve miracles here——although over time the re-shoring of jobs that would result from this 11% labor tax cut would surely generate a higher rate of growth than the anemic 1.3% annual GDP growth rate the nation has experienced since the turn of the century.
In the next section we will delve deeper into the tax swap proposed here. But suffice it to say that with $3 trillion of imported goods and services and $10 trillion of total household consumption, the thing to tax would be exactly what we have too much of and which is the invalid fruit of inflationary monetary policy in the first place.
To wit, foregone payroll and corporate tax revenue should be extracted from imports, consumption and foreign oil. An approximate 15% value added tax and a variable levy designed to peg landed crude prices at $75 per barrel would more than do the job. And revive the US shale patch, too.
* * *
As we began, there is a sliver of hope if Donald Trump does not capitulate to mainstream policies and is willing to set aside his potpourri of shibboleths and panaceas in favor of a disciplined and coherent game plan that builds on his bedrock political insight that American families are losing the economic battle. To repeat, there is a way forward for the self-proclaimed world class deal maker to move the whole mess out of the hopeless paralysis of governance that now afflicts the nation.
A President Trump would need to make Six Great Deals…
A Federalist Deal to turn back much of Washington’s domestic programs and meddling to the states and localities in return for a 4-year freeze on every single pending regulation and statue.
A Health Care Deal based on the repeal of Obamacare and tax preferences for employer insurance plans and their replacement with wide-open provider competition, consumer choice and individual health tax credits.
A Fiscal Deal to slash post-disarmament spending for defense, devolve education and other domestic programs to the states and cities and to clawback unearned social security/medicare entitlement benefits from the affluent elderly.
And a Sound Money Deal to end the Fed’s war on savers and retirees, repeal Humphrey-Hawkins and limit the central bank’s remit to providing last resort liquidity at a penalty spread over market interest rates based on good commercial collateral.
- According To Deutsche Bank, The "Worst Kind Of Recession" May Have Already Started
One week ago, Deutsche Bank’s Dominic Konstam unveiled, whether he likes it or not, what the next all too likely step will be as central bankers scramble to preserve order in a world in which monetary policy has all but lost effectiveness: “It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes.”
Many were not happy, although in reality the only reason why the DB strategist proposed this disturbing idea is because this is precisely what the central banks will end up doing.
Today, he follows up with an explanation just why the central bankers will engage in such lunatic measures: quite simply, he thinks that economic contraction is now practically assured – and may have already begun – for a simple reason: contrary to popular belief, this particular “expansion” will die of old age after all, and won’t even need the Fed’s intervention to unleash the next recession (if not depression).
There is an old saying amongst market watchers that economic expansions do not die of old age. Rather, during the course of the business cycle dynamics emerge that threaten to become unacceptable from a policy perspective. In the context of economic expansion, that dynamic has been inflation. The conventional pattern has been that as expansions mature, demand for labor outstrips the available supply, creating upward pressure on wages. In the presence of pricing power, higher wages are passed along to end consumers through higher prices. Profits decline to the extent that wage acceleration outstrips price increases. The point is that the historical template has the Fed, as an exogenous agent, raising rates to slow wage growth and inflation and to restore profits. In this sense the cycle is actively terminated, rather than “dying of old age”.
A number of stylized facts about the business cycle are apparent historically. Recessions always occur as part of an effort to restore profit growth. Profits are almost always dependent on productivity growth. Productivity recoveries almost always involve reduced labor demand. Productivity recoveries usually follow a period of stronger wage growth – and in that way productivity and wages are correlated. It is the strength in wages, however, that pressures profits unless passed through into higher prices. It is therefore always the case that recessions involve a period of central bank monetary tightening aimed at curbing any pass through of higher wages into prices and thus forcing a slowdown in labor demand to boost productivity via a recession and to then curb the rise in wages. Recessions are effectively created by policymakers to counter otherwise accelerating inflation.
However, this time it’s different. As Konstam writes, “the current cycle is distinct in that pricing power is generally lower than in the past… This is likely because of the now well worn theme of global competition: production can be moved to lower wage centers, allowing constant or larger profits in an environment of steady or even lower prices. Lower pricing power reduces the ability of the corporate sector to pass along even mild wage increases to consumers and makes profits that much more vulnerable.“
Then there is the issue of plummeting productivity, something discussed here extensively in the past:
A second unique aspect of the current cycle is that productivity growth across major economies has been stubbornly low throughout the cycle. We have particular sympathy for the idea that demographic changes are at least in part responsible. The aging of the baby boomer generation has been reflected in an aging workforce, and productivity growth in older workers is lower than in younger workers for life cycle reasons: these workers are further removed from education or vocational training in the use of technology and at any rate have already acquired a set of job related skills.
Because in equilibrium workers are paid their productivity, stagnant productivity growth implies static wage growth. It is incorrect, however, to presume that faster wages imply concurrent faster productivity growth. Higher productivity might have followed higher wages in the past, but only by virtue of reduced labor input that was meant to contain wage growth relative to consumer prices and restore profits.
If imbalances arise in the supply of and demand for labor, wages might temporarily accelerate more rapidly than underlying trend productivity growth. This creates a profits problem. The Fed restores productivity by slowing aggregate demand, allowing labor input to decline more rapidly than output. Higher productivity restores profits: wage increases are “paid for” by increasing output per unit labor input. As with lower pricing power, stubbornly low productivity growth makes (falling) profits weaker on the margin.
Konstam then flips the entire “old age” question on its head and asks the relevant question namely whether the Fed is still needed to create a recession given the characteristics of the current economic cycle.
We would argue that it is not. Last week’s employment report illustrates that there is still very little or no wage pressure. This points to the persistent presence of slack in labor markets, perhaps because NAIRU is lower than even the latest estimates. Moreover, to the extent that the Fed is seeking to increase wage share, they should be biased to remain “behind the curve” pursuant to optimal control. Note that the absence of wage and price pressure and a static Fed are more or less consistent with the current level of yields and the shape of the curve, while optimal control would bias the curve steeper in a bearish fashion.
So if Fed action (read tightening) is not needed to induce a recession, what could be the catalyst? According to DB, two things.
The first is a demand shock. This could in principle occur as a result of Fed tightening as during the 2007/2008 housing shock which occurred well after the Fed effort to curb wage growth was under way. In these instances the demand shock forces rapid reductions in labor demand due to the profit drain from higher wages. The central bank usually reverses course quickly with monetary easing, and fiscal stimulus is deployed to counteract the negative demand shock. In terms of market movement, the reaction of policy makers to a demand shock would bias the curve to steepen bullishly.
In the current environment, savings rates are rising and likely to continue to do so. We have recently argued that demographics are pushing the labor force participation rate lower, which exerts upward pressure on the savings rate. It is not clear the consumer has experienced a shock sufficient to create a recession. However, to a larger extent a slow rise in savings is to be expected given the demographic picture – a large proportion of baby boomers are approaching retirement, when savings rates are typically highest – and because twenty-somethings need to save for homeownership for longer than previously given more stringent credit standards. A shock rise in savings would require a collapse in risk assets including house prices. Such a shock could emanate from a disorderly deleveraging in China, perhaps accompanied by a lumpy devaluation. We would argue that – thanks to the unfolding relent – scenarios such as these are less likely now.
Maybe, although as we showed recently, as of March, the US savings rate following numerous revisions, was already at the highest in over three years and rising.
Which brings us to Konstam’s worst case scenario, one which is quickly starting to smell like the credit analyst’s “base-case” namely the “third avenue for recession” which Deutsche Bank believes is the worst of the three. “This is an endogenous slowdown in labor demand that results because corporations are not just tired of negative profit growth, but also because they are drawing a line in the sand from the perspective of defending margins. No one knows where that line is. But payroll reports like last week’s suggest it could be around here. We have had the worst profit recession since 1971 but profit share is still in the low 20 percent range, having peaked around 24 pct. The worst level has been in the mid to low teens.”
And the punchline:
An endogenous recession – not due to a negative demand shock or Fed policy tightening – is the worst because not only does it speak to policy impotence, but it also highlights the inherent contradiction in capitalism that has worried economists for over a century. That contradiction is that profits, savings or “surplus” must be continually plowed back into the economy to support growth, yet doing so runs the risk of undermining the next profit cycle through over supply. If profits are not plowed back, corporations run the risk of deficit demand. In simple terms, a line in the sand for profit share means that corporations end up firing workers who just happen to be consumers as well.
But why plow back profits into the economy when one can just buy back stock instead and make owners of capital wealthy beyond their wildest dreams when you have every central bank, and in the case of the ECB explicitly, backstopping bond purchases so that the use of proceeds can just to to fund buybacks.
Or, god forbid that the “inherent contradiction” not in capitalism but in the neo-Keynesian model is revealed, exposing all those tenured economists and central bankers as clueless cranks, and finally vaulting Austrian economics to the pinnacle of economic thought.
The irony, of course, is that once the global economy falls into the deepest economic depression the world has seen – perhaps ever – everyone will be shocked and confused hot it is that we go there when “markets” kept rising, and rising, and rising…
Sarcasm aside, let’s summarize: according to Deutsche Bank the worst kind of a recession, an “endogenous one” in which labor demand plunges as “corporations are not just tired of negative profit growth, but also because they are drawing a line in the sand from the perspective of defending margins” may be imminent… or is already here because based on “payroll reports like last week’s suggest it could be around here.“
Surely, that alone should be enough to send the S&P to new all time highs.
* * *
And for those wondering: yes, according to DB things will get worse simply because they have to get worse to offer some hope for an actual mean reversion-based recovery. Sadly, as DB is all too correct, the only way that central banks have ahead of them now involves more negative rates, more wealth transfers, and of course, the infamous “wealth tax” DB touched upon last week.
Things will need to get worse before policy can become radically better. That may involve piling more debt from government onto existing debt, coupled with “helicopter money” elements to reduce some of the burden for existing debtors. It could involve a direct transfer away from profits and savers to workers and spenders via negative rates and wealth taxes that banks collect either way. There is light at the end of the tunnel. But we have yet got to the right tunnel and probably won’t until the US falls into a recession.
Actually, make that a depression, because when central banks have really nothing left to lose, that’s when the terminal step in fiat debasement can finally begin.
- Supermodels And Other Productivity Measures
Submitted by Nick Colas of Convergex
Supermodels And Other Productivity Measures
One of the livelier debates in economics at the moment relates to the intersection of productivity growth and the role of technology in modern society. At its core, the problem is a simple one: for all the smartphones, Internet access, apps and other technological advancements of the last decade, productivity growth is close to zero (0.3% in Q4 2016). One popular rebuttal from tech land is essentially “You economists are doing it wrong – missing critical items like free apps and other benefits of an interconnected world.”
Today we look this problem through a novel lens, measuring the inflation adjusted price of productivity-enhancing consumer items from the 1920s. The idea is that these products – cars, washing machines, electric refrigerators, sewing machines and typewriters – helped play a role in forming the golden age of U.S. productivity growth (1939-2000). Our conclusion: if current day technology is so helpful to productivity, why is it so cheap?
* * *
Audrey Munson was the world’s first supermodel, but unlike her modern day counterparts, hers was a life of genuine trouble and suffering. She worked in the first years of the 20th century, modeling primarily for sculptors who were creating works for both public display and private homes. She had three things going for her which made her an extremely popular model with the artists of the day:
- She closely resembled the classical Greco-Roman ideal of beauty, with a symmetrical face and what was deemed at the time an appropriately proportional body type.
- She was very entrepreneurial, going from door to door looking for work with New York’s very best artists.
- She would work in the nude but purely in a professional capacity, which engendered tremendous respect among her peers.
Sadly, as modernism shifted artistic tastes away from classical forms she eventually fell on hard times. By her 40s, mental illness set in and she was committed to a psychiatric hospital. She died at the age of 104, in 1996, having spent the majority of her life in the St Lawrence State Hospital for the Insane in upstate New York.
There is a recent book out about Audrey’s life – aptly called “The Curse of Beauty” – which I can recommend if you want to learn more. If you want to see a few images of the sculptures she inspired, here is a small sample:
- On the Upper West Side of Manhattan, a memorial to Isidor and Ida Strauss who perished on the Titanic, and some color on the book from Vanity Fair: http://www.vanityfair.com/culture/2016/04/americas-first-supermodel-audrey-munson
- Adolph Weinman’s “The Setting Sun” created for the Panama-Pacific International Exposition: https://commons.wikimedia.org/wiki/File:Sunset-FC-October-1915.jpg
- Daniel Chester French’s “Mourning Victory”, which has pride of place in the Metropolitan Museum’s American Wing: http://www.metmuseum.org/toah/works-of-art/15.75/
- Some pictures of Audrey in real life: http://www.dailymail.co.uk/news/article-3479186/NYC-s-supermodel-inspire…
We know what Audrey made as a model: $0.50/hour, or $12.03 adjusted for inflation today. Compare that to Linda Evangelista, who once famously proclaimed “I don’t get out of bed for less than $10,000/day”, and you have a bit of an economic conundrum. Why are models worth so much more today? After all, they aren’t any more “productive”…
The answer, or at least “an” answer, is that photography is a more scalable medium than sculpture and less open to the artist’s interpretation of the model. Audrey was famous in her time, to be sure, but Kate Moss and Adriana Lima have the benefit of thousands of photographic images to build and maintain their brands on a global basis. And while a good photographer can help, in the end “The camera never lies”.
All of this reminds me of the current debate in economic circles: why is U.S. productivity growth so slow (all of 0.3% in Q4 2014, and well below post-War trends of 2% since the Great Recession) when we have so much new technology around? This puzzle even has a name – Solow’s paradox – after Nobel Prize winner Robert Solow’s offhand comment “You can see the computer age everywhere but in the productivity statistics”. Explanations from Silicon Valley, who aren’t fans of this line of reasoning, range from “You’re measuring productivity incorrectly” to “wait for it, it’s coming” to “it’s concentrated in the services sector”.
You can read a good review of the debate here, in a 2014 article in The Economist: http://www.economist.com/news/special-report/21621237-digital-revolution-has-yet-fulfil-its-promise-higher-productivity-and-better
One way to consider the question is to look at what productivity-enhancing technology cost in the 1920s and compare it to popular consumer products today. The idea is simple: technology that truly boosts productivity should be expensive since buyers will happily pay a price premium for that benefit.
Take one nearly antediluvian example: the sewing machine. In the 1850s one of these devices cost $100 – about $2,700 in today’s dollars. Why so much? First, they increased household productivity dramatically since most clothes were homemade. Second, the better designs enjoyed strong patent protection. Fun fact, and not surprising given these numbers: sewing machines were the first product sold in the U.S. on an installment plan. After all, who could afford $100 all at once?
Fast forward a bit to the 1920s, and consider the prices of other household appliances:
- A washing machine for $81.50. That is $970.39 today. Actual current price of a nice GE or Whirlpool top loading washer (courtesy of PC Richard’s website): $450.
- A vacuum cleaner for $28.95, or $344.70 today. Actual current price of a Shark Navigator on Amazon: $179.00
- An electric refrigerator for $285.00, or $3,393.38 today. A nice chrome one from Best Buy today: $899.99.
- If you are feeling nostalgic, here are the ads: http://www.thepeoplehistory.com/20selectrical.html
As for office productivity, the typewriter was all the rage at the turn of the 20th century, costing all of $39.80 around 1915. That is $627.66 today. Funny enough, a medium range Dell desktop with screen costs $699 today on Amazon.
Now, if we are getting so much productivity out of the current range of offerings from Silicon Valley, I have a question: why aren’t these products really expensive, as the technology of the 1920s clearly was? In fairness, a cell phone is costly – good monthly deals from major carriers usually make you pay about $600 for the phone. Which, funny enough, is what the typewriter cost (inflation adjusted) exactly 100 years ago.
But what about all the free apps and services? Even Uber has to pay bonuses to recruit drivers. Why is that, if the model is so good? Yes, getting to scale is important for the service, but shouldn’t drivers come running if their productivity is so much better in the new model? Something is off. Either the competitive pressures of excess venture capital in the system is dampening pricing power, or perhaps the latest wave of tech just doesn’t hold a candle to the real productivity enhancements of sewing machine, typewriter, washer and fridge.
I know – none of this really answers the question of Solow’s paradox satisfactorily. At the margin, it does seem that the technologists have it right: something is wrong in the measurement of productivity. The world has changed dramatically in the last decade, from iPhones to Uber and Facebook. Whenever I write on this topic I get one consistent retort: productivity is flat because we’re all on social media. Maybe so… But then why isn’t Facebook expensive to use? In fact, I hear it is basically free.
- Tesla and GM Will Probably Both Be Bankrupt in 10 Years (Video)
By EconMatters
I was originally looking at Tesla from a trading standpoint, but in comparing GM, both company`s Financial internals look bleak longer term. GM is a debt accumulating machine, and Tesla is the starter version of this model. The Automobile manufacturing Industry is a capital intensive business, but both these companies are laggards to best practices in the Industry at large. There is major trouble ahead for both companies at this level of financial mismanagement. Tesla is trying to grow too fast, and GM is a bloated Government style bureaucracy that requires major pruning to say the least.
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- The King Of Crony Capitalism
If Elon Musk’s various projects are so Iron Man fabulous, why do they all need so much government “help”? Shouldn’t Tesla – and Solar City and SpaceX – be able to stand on their merits… if they actually have merit?
Tesla fanbois – and Musk himself – will tell you all about the virtues of his electric cars. They are sleek and speedy. This is true. But they are also expensive (the least expensive model, the pending Model X, will reportedly start around $35k, about the same price as a luxury sedan like the Lexus ES350) and come standard with a number of significant functional deficits such as a best-case range about half that of most conventional cars and recharge times at least 4-5 times as long as it takes to refuel a conventional car.
That’s if you can find a Tesla “supercharger” station.
If not, then the recharge time becomes hours rather than half an hour.
But the real problem with Tesla cars is that no one actually buys them.
Well, not directly.
Their manufacture is heavily subsidized – and their sale is heavily subsidized
Either way, the taxpayer (rather than the “buyer”) is the one who gets the bill.
On the manufacturing end, Tesla got $1.3 billion in special crony-capitalist “incentives” from the state of Nevada to build its battery factory there. This includes an exemption from having to pay any property taxes (unlike you and I) for the next 20 years. Another inducement was $195 million in transferable tax credits – which Tesla could sell for cash.
California provides similar inducements – including $15 million from the state of California to “create jobs” in the state.
Tesla does not make money by selling cars, either.
It makes money by selling “carbon credits” to real car companies that make functionally and economically viable vehicles that can and do sell on the merits – but which are not “zero emissions” vehicles, as the electric Tesla is claimed to be (but isn’t, actually, unless you don’t count the emissions produced by the utility plants that provide the electricity they run on, or the emissions produced mining the materials necessary to make the hundreds of pounds of batteries needed by each car).
Laws in nine states (including California) require each automaker selling cars in the state to sell a certain number of “zero emissions” vehicles, else be fined. Since only electric cars qualify under the law as “zero emissions” vehicles – and the majority of cars made by the real car companies are not electric cars – they end up having to “purchase” (air quotes for the same reason that you are a “customer” of the IRS’s) these “carbon credits” from Tesla, subsidizing Tesla’s operations and adding to the expense of manufacturing their own functionally and economically viable cars.
The amount Tesla has “earned” this way is in the neighborhood of $517 million.
Tesla is a newfangled take on the welfare queen. Or more accurately, the EBT card – which is designed to look like a credit card. To have the appearance of a legitimate transaction … as opposed to a welfare payment.
Underneath the glitz and showmanship, that’s what all of Musk’s “businesses” are about. They all depend entirely on government – that is, on taxpayer “help” – in order to survive.
Without that “help,” none of Musk’s Tesla’s could survive.
It is estimated that Tesla’s various ventures – including his new SolarCity solar panel operation and SpaceX – have cost taxpayers at least $4.9 billion, with Tesla accounting for about half of that dole.
And he still loses money.
Musk fanbois will counter by pointing out that other businesses – including the car business – also get “help” from the government (that is, from taxpayers) which is perfectly true. But that’s not much of a defense – much less a refutation of the charge that Musk is a crony capitalist.
Which is all he is.
The real difference between Musk’s operations and those of say General Motors is that General Motors’s products are fundamentally viable while Tesla’s are not. GM is happy to accept government “help” when offered but it is not necessary for taxpayers to bankroll the production of Corvettes – nor provide thousands of dollars in cash incentives to each prospective buyer in order to “stimulate” sales.
The straight dope is that Tesla could not build a single car without the government’s help. Take away that “help” and the actual cost would be so prohibitive that virtually no one except perhaps fellow billionaires like Musk with money to burn on toys would buy a Tesla.
As it is – even with massive subsidies at the manufacturing level and then again at the retail level – each Tesla still “sells” at a loss of several thousand dollars per car … adding up to almost $400 million so far this year (the company just announced this; see here).
The typical Tesla “buyer,” meanwhile, has an annual income in excess of $250,000.
Why are taxpayers – the majority of them not earning $250k annually – being taxed to support the “purchase” of electric exotic cars by extremely affluent people?
Why should taxpayers be made to subsidize any of Musk’s “businesses”?
He’s a billionaire.
And – we’re constantly told – a really smart guy.
Surely he could fund (or find) the private capital necessary to fund his various projects. The fact that he could not find private – that is, willing – investors but instead has to rely on the coercive power of the government to fund his projects speaks volumes about the fundamental worth of his projects.
He “succeeds” only because of his ability to game the system, not by offering products that people are willing to pay for (using their own money, that is).
The heroic real-life Tony Stark image notwithstanding, Musk is an operator – not a creator of value.
He has more in common with the vulture capitalist oligarchs of the former Soviet Union than with the namesake of his electric car company.
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