Blitzkrieg

Regular reader should recall musings in the recent past that Germany, and to a lesser extent France, are intent on punishing their victims in the Euro Crisis. To wit, that these exporting dependent economies, the aforementioned Germans and French, dumped output onto their lesser compatriots in the Eurozone. They were able to pull this off, for some period of time, so long as the Euro itself remained stable; a Greek Euro was as good as a German Euro. And that equality could last only so long as the Germans and French propped up the PIIGS, but indirectly. Overt support, now necessary, irritates the Man on the Street Citizen in Germany and France, either because they're just too stupid to figure out the scam, or were in on it.

Now that they're no longer able to buy up the surplus output, the Germans and French want to maintain their economies by extorting funds (money being fungible) from the lesser countries by other means. Our downtrodden Banksters have been busy inventing ever more overt ways to extract funds (almost entirely profit, of course) from the saver to borrower money stream now that the "crisis" has been averted and stricter (although not by much, thanks to Bankster lobbyists) regulation, but most knucklehead consumers (and regulators) refuse to accept that Banksters need to be brought to heel. The past week has also included reporting that China, as predicted here, has an excess output problem too. "It's the distribution, stupid."

Not too surprisingly, today brings confirmation of German and French perfidy.

They include the German and French banks that lent Greece money and fueled the Spanish housing bubble...

Again, the Germans and French sought higher than domestic (in their perspective) returns, since their own economies couldn't pay extortionate returns. The Spanish housing bubble, not motivated by government, was the result of the exporting countries, Germany particularly, seeking unrealistic returns on profits gained by dumping output into those self same countries. Heads I win, tails you lose economics. Even if Germans and French (and American Banksters) manage to convince citizens and regulators that all this is sustainable, collapse happens in due time. Without a foundation of income distribution, capitalism collapse of its own extortion.

The circle of perpetrators could also include the fickle bond investors who underpriced the risk of Greek debt before 2010 and whose volatile reaction to even minor events has lately been wreaking havoc with Spanish and Italian borrowing costs and, by extension, those countries' economies.

There's a reason some, including humble self, have screamed bloody murder that bondholders got off scottfree during The Great Recession. It was their greed for unsustainable returns on idle money that caused the crisis. Yes, idle money. When I was kid, the term "idle rich" was in common English, and was synonymous with "coupon clipper", also common English. The latter doesn't refer to folks who take out Pampers discount coupons from their daily newspaper, but to the fact that bonds pay a "coupon value", and in the olden days one literally removed a perforated tab from the margin of the bond (the coupon) for redemption for moolah.

In fact, Gerhard Schröder, the German chancellor until 2005, was one of those calling loudest for the rules to be watered down so he would not have to cut government spending.

The quote refers to the fact that Germany didn't want new restrictions back in 2005 that they're now demanding against the PIIGS. I wonder how to spell hypocrisy in German?

"It was German government decisions and German banks -- and Austrian banks and Dutch banks and Finnish banks -- who lent the money to all these countries," Adam S. Posen, a United States economist who is an external member of the Monetary Policy Committee of the Bank of England, said on BBC television this week.

Finally, he drops the Truth Bomb, asserted here for some time.

Germany lent the money so it could be used to buy German exports, Mr. Posen said. "Germany has been running a scheme in their own interests," he said.

I think he's pointing out that the Emperor is quite naked. Cool.

Rocky 99

It sure seems like there've been 98 of the darn things. So, on to 99. With ggmap. "What's that?" I hear from the cheap seats. Welllll.

Last month, ggmap was released. The author's web site is here and his presentation is here. Since I'm still on the fence about Triage/mapping for the Philly Folks, ggmap would surely be the vehicle. By all accounts it makes map generation with ggplot2 easier than previously.

The presentation is quite neat. Not only that, but he does compare logic the way I've always preferred:
-95.39681 <= lon & lon <= -95.34188 & 29.73631 <= lat & lat <= 29.78400 That is, left to right (in)equality as the number line. I always get irritated when folks do: x > 5 and the like. No, it ain't.

Marginalized in Gaza

Just came across this piece, and someone in the interTubes who gets marginal cost based pricing: "'Freemium is really a construct of the digital age because there's almost no marginal cost to digital goods,' said Chris Anderson, author of "Free: The Future of a Radical Price," and editor in chief of Wired magazine.'"

No shit, Sherlock.

I'll Have a Cheese Steak

Somewhere along the line, I applied to the Obama folks to "volunteer", being as how I have the time and no immediate need for moolah. Philadelphia called, offering me the possibility of doing data entry for one of the low level worker/manager bees. Even though I pointed them to the Triage piece, as example of the sort of support I'm willing to do. For FREE. Doesn't seem promising. Doesn't seem promising for Obama, either, since the organization has clearly gone bureaucratic.

Which got me to thinking: can triage by implemented at such a granular level? Turns out, shapefiles exist below city level (political wards) for Philadelphia. For example! Boy howdy. I may do a second triage just to irritate them.

Carrtharsis

Everyone with an active skull should keep track of Nick Carr. I don't stop by frequently enough, it turns out. A bit more than a month ago he delved into my brain, for those that recall earlier musings on why we are the way we are. Go read it. I missed it because it's sitting as a marginal link on his page. Note to self: follow Carr links.

The Canary Comes Home to Roost

Since all but a minuscule fraction of the shares traded on the exchanges every day (0 on most days) are not sold by the companies whose names are on the certificate (which means none of the money goes to the companies), traders aren't any different from plungers betting 14 Red at a roulette wheel. The buyers think the sellers are idiots for selling so cheap; likewise in opposition, the sellers.

The au courant cause celebre' is Facebook, and its connected companies. Today's NY Times carries a long story starting at the front (above the fold) of the dead trees Business Day. The article is of interest, but what's of interest to this endeavor is the caption to the picture inside (it is reproduced in a margin in the on-line version, so I don't have to type it out, yeah!): "Facebook has asked for patience as it invests the capital raised in its initial public offering and seeks to increase its revenue." This is interesting for its sheer chutzpah (as in "cheese").

Here's the two numbers that don't add up:

From the last 10-Q: physical assets are $2,105,000
From Yahoo!, market cap: $42,000,000

What are they going to "invest" in?? What's not commonly understood is that software companies generally, and internet based ones specifically, are capital light. Facebook is unusual in that it does own data centers; it need not, and many internet software companies do not. Their asset/cap ratios are even more outlandish.

So, what does it mean to invest in any kind of software company? You hire coders to type on PCs. A PC of sufficient horsepower to do this work can be had for south of $3,000; much less if you build them in-house from parts which is what Google does. It will be more if the company buys giant monitors, which might cost more than the PC unit itself, but still absurdly cheap. In other words, this ain't Ford. Here's their current numbers:

From the last 10-Q: physical assets are $22,105,000
From Yahoo!, market cap: $37,000,000

There's a reason the "capitalists" of the USofA have abandoned capitalism: it's cheaper to get rich if you don't actually turn fiduciary capital into physical assets. You're pulling "value" out of thin air. Alchemists of old tried to turn lead into gold; today they try to turn code into gold. If you can pull it off beyond fad duration, the gross margin in software can't be beat; Cost of Goods Sold is asymptotically 0. Whether that can continue is contingent on the US dollar remaining New Gold (discussed in previous entries). So long as the Right Wingnuts can control the game (with the help of the Banksters; and there's a fair amount of overlap between the two camps), then money is the commodity. What the Facebooks of the world "produce" is ephemeral, unlike Ford, which makes autos you can drive (if you like what Ford builds). Since this New Economy is largely unbarterable, a stable (if not falling) dollar is essential to the game. The game also depends on folks equating the "psychic utility" one gets from one's Facebook page as from the physical utility of a Mustang. Good luck with that. To steal from "The Graduate", one word -- MySpace.

To deal with the question raised by the photo caption: there's not much that they can do which supports organic growth of Facebook. As is well known by now, most of the developed world has gone to Facebook about as much as it can or will. There are those, humble self included, who've figured out that wasting time and relinquishing privacy to a rapacious kid isn't such a great idea. Facebook is just another in a long line of advert pushers, none of whom, apparently, ever considered that a more fashionable form of advert pushing might ever come along. It does, and will. Will dollar a day indentured workers in the rest of the world (assuming they have access to a PC, internet, and/or smartphone) have sufficient money to spend on Facebook's adverts' wares? I'll bet: nope.

Facebook could hire more coders, but the "investment" consumed by such is about $5,000 per coder. According to the 10-Q, they've got about $10 billion to spend. They could hire every Indian coder alive, and have money left over. And, what would they produce? MicroSoft, very good at the software game, has had only one money spinner, Office (which it first built on contract to Apple, by the way). Facebook had one neat idea. Odds, historically, that such blinkered thinkers could have another neat idea are teeny.

Adding data center support per user comes out of that pile, too. But user growth is slowing, perhaps with ABS engaged. I suspect they'll "grow" by buying up other companies, such as Instagram. Such growth can be attached to the buying company, but yields no growth from a macro-economic point of view. Most often, jobs are lost when companies consume each other. You scarf up a competitor, and either shut it down, or consolidate with your folks taking over for the non-worker bees. In all, for the economy as a whole, a net bad. And, as MicroSoft just demonstrated, buying up a competitor (or synergistic function) isn't going to work, just because it was supposed to.

Damn, Not Again

Regular Reader understands the motivating principle of this endeavor: lacking a theory of distribution, which clears output at its maximum, capitalism will soon implode. Marx, and others before him, made the selfsame observation. What is different since "Das Capital" is a burgeoning global population, industrialized authoritarian regimes, and disappearing resources.

The theme today is that of the vise (with a "s" not a "c"; we'll save the latter for later): our future, given our present approach, is inevitably dystopian. The closing jaws of the vise: to left, population growth out of control; to the right, diminution of necessary resources. Turning the screw arm of the vise: capitalists deploying automation robots. One might add, in the context of "post industrial" West, the disappearance of production of necessities. How much food is a CDO worth? Likely, 0. Have a pleasant starvation.

As mentioned in previous essays, there are days when I think that the NYT folks read here, then go and do some confirmatory reporting, and end up with an anecdote laden article. Sometimes depressing. It only gets worse when it seems they're reading my thoughts.

For the last few weeks, I've been looking around for some data, not yet found. This data is the number of labour hours per widget (auto, washing machine, etc.) over the last 50 or 60 years. The Right Wingnuts *still* blame our Great Recession on the evil (unionized) workers of America. Not that even much of American industry is unionized. No matter. The problem has to be the victims. The point behind this search is to confirm (more likely than deny) that ever more capital is replacing labour, and that the resultant reduction in income (median income is well documented to be at best stagnant over the last 30 years) of the masses causes failing demand for output. Capitalists respond by replacing labour with yet more machines, further reducing income of the masses. Rinse, repeat.

As any Good Mother has said to a bratty child: "what would the world be like if everyone behaved like you?". The conflict between micro- and macro-economists has been going on since the beginning of the profession. With the introduction of ever more abstruse algebra and computerized statistical methods, the micro-economists have succeeded in re-defining macro- to be just the sum of the micro-. If all producers impoverish their workers (generally through disemployment, but also direct income reduction), the early adopters gain a temporary advantage, but soon aggregate demand disappears. Productivity is kind of like the Ogallala Aquifer: if all those who tap it treat it as their exclusive well, the water runs dry sooner than if all users treat the resource as shared. Bad behaviour triumphs, and all fail. Avoiding failure requires community action. Or, how about community organization?

So, today the NYT prints a story on robots. They don't have the data I was looking for, but does have anecdotes which make the case: labour hours per output units (autos, washing machines, etc.) declines catastrophically once capitalists discover robots. The tenet of (neo-)classical economics is that labour earns at the level of its marginal product. This is supposed to mean the more productive skills earn more. This is also supposed to mean that capital improvement productivity is *shared* with labour; not exclusively by the capitalist. "Free enterprise", in Adam Smith's construction, meant that no capitalist could unilaterally affect wages. We've seen that this is a crock in the real world.

Where affairs get even more tenuous is that the Chinese capital model would look identical to that of a 19th century New England mill owner: lots of hands from the shuttered farms keeping up with minimalist mechanization. This is the ideal for the Right Winger: the many supporting the few, the workers seldom earned enough to actually to buy their own production. It worked in the 19th century just because there was an entire continent to fill up with humans who bred like rabbits. We aren't in that sort of Kansas anymore. Not to mention having markets in Europe to sop up surplus production.

The story begins with two factories owned by a Dutch company. One in The Netherlands, the other in China. The domestic one is virtually without workers and almost entirely robots. The Chinese is the 19th century ex-farmer model of modest machinery and lots of hands.

Factories like the one here in the Netherlands are a striking counterpoint to those used by Apple and other consumer electronics giants, which employ hundreds of thousands of low-skilled workers.

Since the company operates on the micro-principle that any way to reduce cost (its own, and hopefully no others follow suit) is a Good Thing, the goal is to make more money shipping product. This only works if no other companies do the same. Yeah, right.

Even as Foxconn, Apple's iPhone manufacturer, continues to build new plants and hire thousands of additional workers to make smartphones, it plans to install more than a million robots within a few years to supplement its work force in China.

This may work for Apple, in the near term, but makes China's problem worse. Many/most of the Foxconn (and others) workers were brought in from the farms, lured by promises of a "better life". Urban poverty is arguably worse than rural. Neither is anything to envy.

But its chairman, Terry Gou, has publicly endorsed a growing use of robots. Speaking of his more than one million employees worldwide, he said in January, according to the official Xinhua news agency: "As human beings are also animals, to manage one million animals gives me a headache."

Nice to know that Chinese capitalists are up on their animal husbandry. American capitalists are no less hypocrites.

Take the cavernous solar-panel factory run by Flextronics in Milpitas, south of San Francisco. A large banner proudly proclaims "Bringing Jobs & Manufacturing Back to California!" (Right now China makes a large share of the solar panels used in this country and is automating its own industry.)

Yet in the state-of-the-art plant, where the assembly line runs 24 hours a day, seven days a week, there are robots everywhere and few human workers.

The argument that robot manufacturing makes the transition a net Good Thing is specious. Clearly, no capitalist will buy robots whose cost approaches that of the replaced workers. At the same time, the earnings of robot making workers aren't going to approach that of the workers replaced by the robots, for the same reason. While it is remotely possible that aggregate income of the robot making workers can approach that of the (by count, far more) replaced workers, the median simply can't. There'll be income/wealth concentration, and falling aggregate demand.

Which belies the Left Wing meme: we need better education to compete and keep American workers' incomes high. The nonsense of that should now be obvious. Where, in the post WWII two decades, we had rapidly rising blue-collar families reaching previously unknown middle-class status, this was largely due to a temporary diminishing of capitalists' aggression, which in turn was the result of a true "we're all in this together" ethos persisting from the war. As time moved on, attachment to the ethos faded, and by Reagan had disappeared. Capitalists were in it for themselves. And any blue-collar folks dumb enough to believe their lies. Better education for the millions, while the new robot meme creates jobs in the thousands (if that many), can't add up. The value of education diminishes as the demand for higher skills fades, or never exists. The Indian usurption of IT is fueled by very low cost education in IT in India, and more than a little bit of foreign exchange chicanery.

From here:

I estimate that my entire education in India, including a master's in computer science, cost me less than US$ 100 in today's terms.

While a single anecdote, it exemplifies how it is that Indians can work for peanuts: they spent so little on their education that work decisions become simplified, earn a pittance in the fields with cow dung or earn a pittance in an air conditioned office. Not such a difficult decision. (The Times also has a piece on the true impact of air conditioning. One never really knows where Mother Nature will spring a bear trap.)

As capitalists remove labour from the equation, they remove demand for their output from the equation. It all becomes a race to poverty. This is where the micro-economists fail: macro-economics isn't just aggregated micro-. When all capitalists behave like brats, soon they and the rest of us suffer. Distribution of output is of more importance in a capitalist/industrialized world. The Right Wingnuts are just too stupid. Then again, unlike Rand, they believe in God, Senator Dodd (the first one), and keeping old Castro (the first one) down.