Stories
Slash Boxes
Comments

SoylentNews is people

posted by janrinok on Monday October 17 2016, @09:28AM   Printer-friendly
from the where's-the-good-news? dept.

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

What it hasn't delivered are many jobs. Google's Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012.

Hiring in the computer and chip sectors dove after companies shifted hardware production outside the U.S., and the newest tech giants needed relatively few workers. The number of technology startups fizzled. Growth in productivity and wages slowed, and income inequality rose as machines replaced routine, low- and middle-income, human-powered work.

This outcome is a far cry from what many political leaders, tech entrepreneurs and economists predicted about a generation ago. In 2000, President Bill Clinton said in his last State of the Union address: "America will lead the world toward shared peace and prosperity and the far frontiers of science and technology." His economic team trumpeted "the ferment of rapid technological change" as one of the U.S. economy's "principal engines" of growth.

The gap between what the tech boom promised and then delivered is another source of the rumbling national discontent that powered the rise this year of political outsiders Donald Trump and Bernie Sanders.

[...]

Eventually there'll be only decent jobs for maybe 20% of the population:  What economic system is needed for that??


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 2) by TheRaven on Monday October 17 2016, @03:33PM

    by TheRaven (270) on Monday October 17 2016, @03:33PM (#415219) Journal
    It's not quite that clear cut. The 'Greek bailout' bailed out the (mostly private) banks that had made risky loans (and was sold to the public as bailing out the Greek people). This was arranged by a state-controlled bank, but only because they were effectively blackmailed by private banks saying that they'd go out of business if Greece defaulted and this would have serious knock-on consequences for the relevant economies. The solution is probably to split up the banks and make sure that central banks have enough capital to bail out individuals when a bank fails.
    --
    sudo mod me up
    Starting Score:    1  point
    Karma-Bonus Modifier   +1  

    Total Score:   2  
  • (Score: 0) by Anonymous Coward on Monday October 17 2016, @04:00PM

    by Anonymous Coward on Monday October 17 2016, @04:00PM (#415230)

    OK, so let's think about this one.

    Greece borrows a lot of money.

    From banks.

    Greece can't/won't pay back.

    The banks go broke.

    The people who had money in the banks take it in the shorts.

    Greece was the one holding a gun to everybody's head, here, not the banks. The strongest criticism of the banks is that they should never, ever have lent money to Greece (and some banks didn't - or didn't much, anyway).

    Bailing out the banks because of the profligacy of Greece was the easiest way of preventing the little people from taking it in the shorts because of banks folding.

    Unless you had a better plan?

    • (Score: 3, Interesting) by TheRaven on Tuesday October 18 2016, @10:42AM

      by TheRaven (270) on Tuesday October 18 2016, @10:42AM (#415610) Journal
      Here's the problem: If a bank that makes loans that it can't cover gets bailed out, then it has no incentive to perform due diligence, because if it makes a profit from a loan then it wins and if it makes a loss then it passes the cost on to taxpayers.

      Bailing out the banks because of the profligacy of Greece was the easiest way of preventing the little people from taking it in the shorts because of banks folding.

      That's some emotionally charged language. Greece's economy has been suffering in the Euro because it artificially inflated the value of their currency, making exports harder. In contrast, Germany benefitted hugely from having an undervalued currency and was able to increase exports a lot as a result. Economists predicted that this would happen when the Eurozone was set up, but Germany vetoed the proposals to fix it.

      Unless you had a better plan?

      A moratorium on interest for 5-10 years would have been a good alternative. Greece's credit rating would have taken a big hit, but it would have been able to invest money in the internal economy, rather than being forced to enact IMF-enforced 'austerity' measures that caused its economy to further collapse (again, as economists predicted) and made it even less able to pay back the loans. The banks would have kept the outstanding loan balance on the books and so would have retained the capital asset, but they'd have taken a big hit in their profits.

      The real long-term solution is to split up banks that are too big to fail without doing significant harm. If a bank makes bad loans then it should go bankrupt. Government guarantees should protect the money held on deposit (up to a certain threshold), but the bank itself and its shareholders should suffer from poor decisions.

      --
      sudo mod me up
      • (Score: 0) by Anonymous Coward on Tuesday October 18 2016, @04:16PM

        by Anonymous Coward on Tuesday October 18 2016, @04:16PM (#415720)

        I'm all there for not bailing out banks. I agree that the moral hazard involved is a huge problem. That's not really the problem here, however. The banks would have been (mostly) able to weather the storm.

        The big problem wasn't the banks, it was the economy of Greece. See, here's the problem: if Greece didn't default, they'd be dropping their budget like a hot rock because they'd run out of goodwill among their creditors. If they did default, they'd crater their international credit rating and have to leave the eurozone besides (most likely - hard to see how the other countries would have let it slide).

        Without a default, and without a bailout, and without credit flowing to Greece, the little people depending on the (credit-backed) largesse of the greek government would be economically savaged. Greece's economy is so insanely hobbled by counterproductive regulations, such as the hereditary profession system, that these transfers were pretty crucial for continued stability. With a default, the constraints on the economy come even harder and faster, as Greece leaves the eurozone and goes back to a Drachma of no real value, internationally.

        Greece's economy, and the loans extended to it, were small enough that big international banks could weather the storm if Greece defaulted. To them the risk was real, but not fundamental. Moreover, even in the event of a default, they could activate clawback provisions in court to reduce their losses.

        A moratorium is a de facto default. It sounds like a great idea, and is full of warm fuzzies about reinvestment and so on - but it's a default. Banks could start court proceedings to recover their losses on greek assets, and it would have brought credit lines to a screeching halt.

        The too big to fail thing is a red herring in this case, because it doesn't matter if you have ten banks or ten thousand - if they all stop buying greek government bonds because the greek government defaulted, the cash party stops just the same from the greek point of view. Similarly, if you have a lot of tiny banks going bust because of one shock, it's not that any one bank was too big to fail, but the entire sector was systemically vulnerable. Tiny banks don't help solve that problem. They do solve other problems, but not that one.

        Reinvestment is also a red herring, because unless and until the greek economy is radically reformed and opened up, reinvestment will be as stunted in its effects as prior investments.

        You observe, correctly, that the german economy benefited from a weaker currency (Euro rather than Deutschmark), but it's a bit misleading to say that the germans vetoed proposals to fix that, without some background.

        The germans are, to this day, haunted by the hyperinflation of the Weimar Republic. This is why they refused to countenance bailouts - it was politically toxic. The alternative would have been a Germany outside the eurozone, without which the whole eurozone would have been a very questionable project indeed. If the counterparties to the eurozone plan hadn't wanted german involvement, they could have simply ignored Germany's requirements, but it was partly to solve the problem of german economic power skewing the common market's structure that they needed the eurozone. Because of these factors, it's beside the point to say that the germans were pulling the eurozone around, because that was always going to be the case and everybody knew it. Most particularly, the greek government knew it, knew that there weren't supposed to be any bailouts, knew that they were responsible for their own credit, and knew when they sold those bonds that they were overextending themselves - or they ought to have known. They knew what the clawback provisions would look like, they knew that the bonds were denominated in Euro, and they did it all anyway.

        The root cause of what you're describing is a disconnection between monetary and fiscal policy. German fiscal policy was, and is a lot more conservative than greek. Ditto dutch policy, danish and so on. The eurozone was built around conservative monetary policy, because without that there's no way they could have built the eurozone the way they wanted to - they tried to write conservative fiscal policy into it as well, but the fact is that the greek government (and italian, and spanish ...) just didn't feel like doing that. So they didn't. With the results that we all can see.

        The real fix is that the eurozone is fundamentally broken by design, and needs to be torn apart or bound together with a common fiscal system - which is likely to happen shortly after Satan invests in ice skates. Ergo, the whole thing is pretty much a failed experiment. Let Greece have their wildly devaluing Drachma, let the Franc slide down, let the Mark stand like a rock. These are the results, the creations of national characters and voters' preferences. If you want to celebrate diversity and cherish individuality, this is the natural consequence.

        • (Score: 2) by TheRaven on Tuesday October 18 2016, @05:16PM

          by TheRaven (270) on Tuesday October 18 2016, @05:16PM (#415751) Journal

          You observe, correctly, that the german economy benefited from a weaker currency (Euro rather than Deutschmark), but it's a bit misleading to say that the germans vetoed proposals to fix that, without some background.

          Your entire reply to this appears to be related to the bailouts. Germany vetoed the proposals at the time of the introduction of the Eurozone that would have prevented this.

          --
          sudo mod me up
          • (Score: 0) by Anonymous Coward on Wednesday October 19 2016, @04:38AM

            by Anonymous Coward on Wednesday October 19 2016, @04:38AM (#416003)

            You say:

            Your entire reply to this appears to be related to the bailouts.

            I wrote:

            The germans are, to this day, haunted by the hyperinflation of the Weimar Republic. This is why they refused to countenance bailouts - it was politically toxic. The alternative would have been a Germany outside the eurozone, without which the whole eurozone would have been a very questionable project indeed. If the counterparties to the eurozone plan hadn't wanted german involvement, they could have simply ignored Germany's requirements, but it was partly to solve the problem of german economic power skewing the common market's structure that they needed the eurozone.

            That is precisely about the formation of the eurozone, precisely about why there are rules against bailouts (that were shuffled aside by bureaucratic shadowplay) and precisely why the germans are pissed off about it right about now.

            Maybe it wasn't clear enough. Let me try this again:

            When the eurozone was under discussion (with me so far?) they wanted to get Germany involved because it was the largest single participant economy.

            The people in Germany were nervous about being made to pay for other people's debts, so they insisted on a no-bailout rule. Good gravy, why would they be so selfish and close-minded? This is because of the scarring memory of the hyperinflation of depression-era Germany in the interwar period. Starting to see how it fits together now?

            The other countries wanted Germany in, so they agreed to ban bailouts. Seems rational, doesn't it? Want a deal, got to agree to some conditions. Since then, much to the disgust of the germans, the deal has been altered to allow things that look like bailouts, smell like bailouts, but aren't called bailouts. This is currently politically unpopular in Germany. Wow, maybe I was talking about the origin of the eurozone as well as developments since then! Cray-cray!

            I'm hoping you get the picture. I'm over my sarcasm ration for the week, and my smoke detector keeps beeping.

            • (Score: 2) by TheRaven on Wednesday October 19 2016, @08:37AM

              by TheRaven (270) on Wednesday October 19 2016, @08:37AM (#416067) Journal

              The people in Germany were nervous about being made to pay for other people's debts, so they insisted on a no-bailout rule.

              True, but irrelevant. They also vetoed the proposals to move money from the high-speed economies to the low-speed ones to gradually balance the Eurozone. Without that measure, economists predicted that the fast economies would benefit significantly from an artificially strong currency and accelerate, whereas slower economies would suffer from an artificially strong currency. And that's precisely what happened. Germany benefitted hugely, places like Greece and Spain suffered.

              If Germany had not been part of the Eurozone, then this wouldn't have been an issue: the Deutschmark would have grown stronger against the Euro, making it far more economical to set up production outside Germany and export to Germany (cheaply, because of the common market). Eventually, the Mark would have stabilised against the Euro. Similarly, if there had been the kind of rebalancing that happens in the USA (where states like California pay to subsidise development in states with weaker economies via the Federal government), the rebalancing would have happened from the other end.

              Instead, the Germans decided that they wanted the benefits of the Eurozone without the costs. And then it broke and they complained.

              --
              sudo mod me up
              • (Score: 0) by Anonymous Coward on Wednesday October 19 2016, @11:31PM

                by Anonymous Coward on Wednesday October 19 2016, @11:31PM (#416401)

                True, but irrelevant. They also vetoed the proposals to move money from the high-speed economies to the low-speed ones to gradually balance the Eurozone. Without that measure, economists predicted that the fast economies would benefit significantly from an artificially strong currency and accelerate, whereas slower economies would suffer from an artificially strong currency.

                It's very far from irrelevant. It's deeply significant that the germans didn't want bailouts, because it was central to the principle that you'd have a divided fiscus, which leads us back to the situation of monetary integration without fiscal integration. And whether you refer to them as bailouts, or transfers, or "move money from the high-speed economies to the low-speed ones" is just a matter of window-dressing in the teeth of the fact that the germans did not want to be on the hook for decisions in countries that they could not control. It's not even that insane a position - would you want to be on the hook for the mortgage next door?

                You're right that economists predicted that there would be an imbalance, but it turns out that the pain and suffering didn't all end up on the less efficient economies, and the "fast economies" as you put it benefited from a weaker, rather than a stronger currency owing to the disconnect of the exchange rate from their balance of payments - at least as long as the weaker currency lasted, which is to say not long.

                On the other hand, the "slower economies" as you put it effectively did get a transfer whether the germans wanted it or not, because despite all the rules in the eurozone preventing that they assumed that there was an implicit guarantee when they were buying the bonds of Italy, Spain, Portugal and Greece at artificially high prices. The ratings agencies supported this charade as well, so Greece in particular loaded up on debt like that one drinker at a party leaning on the keg. The political situation in Greece fostered this because of Greece's strongly regulated, corrupt and inefficient economy. Eventually the people buying bonds stopped, looked around, and started to get leery of letting Greece just roll the debt over, year after year, and the wheels started to come off.

                Funnily enough, the germans aren't completely opposed to transfers; they just want some control. West Germany has been subsidising the hell out of East Germany basically since reunification, but they're in the beneficial position of being able to insist on some degree of fiscal realism. They also pay lots of money into the european system, that goes to subsidies for underdeveloped regions as a form of systemic welfare.

                I already explained that other countries really wanted Germany in the eurozone. Germany showed every sign of being willing to collaborate on fiscal stability, but if and only if participant countries were willing to give up a substantial measure of fiscal autonomy - a measure that others wouldn't accept. The result is that you can maybe say that the eurozone should never have happened, because the prerequisites for long term stability were never in place, and you'd be pretty much right about that, but to paint Germany as a nation of scrooges who could totally have made it all work if they'd only had the humanity to open their wallets to clear the debts of their profligate counterparts is to utterly ignore the fiscal, political, diplomatic and system preconditions to the situation.

                I could just as easily say that Greece was stupid for entering the eurozone, knowing full well that they'd be shackled to a currency regime totally out of step with their fiscal system. The fact that Angela Merkel twisted the arms of the german people (or betrayed their trust, depending on whose point of view you accept) into running what amounts to a bailout by supporting the european bank's assistance is a step way beyond anything Greece had any right to expect, or reason to hope for. The fact that Greece has to play by some rules to get the help they need - well, bummer. Nobody outside Greece forced them to take on a red cent of debt.

                And that's precisely what happened. Germany benefitted hugely, places like Greece and Spain suffered.

                Spare me the sob story. Germany benefitted hugely until the euro strengthened to the point that it might as well have been another Deutschmark. It started out weak, but then rocketed way ahead of the dollar. The boost they got was temporary. The (poisoned chalice of) cheap credit that Greece and Spain enjoyed lasted a lot longer, and if you compare bond rates, saved them insanely, vastly more than Germany could plausibly have claimed to profit, as percentages of their respective economies over the years. The fact that Spain and Greece loaded up on bonds while failing to reform their sclerotic labour markets, while failing to invest rather than pay off client groups, and failing to take systemic advantage of the stronger exchange rate that would have helped them to boost their economies, is all on them. The standard of living, by purchasing power parity, in Greece and Spain and Italy and Ireland and Portugal, took a healthy step upwards precisely because of the strength of the Euro. Any lip-trembling tale of woe suggesting that the mediterranean economies weren't in a position to derive massive benefits, should they have extended themselves, is utter codswallop.

                If Germany had not been part of the Eurozone, then this wouldn't have been an issue: the Deutschmark would have grown stronger against the Euro, making it far more economical to set up production outside Germany and export to Germany (cheaply, because of the common market). Eventually, the Mark would have stabilised against the Euro. Similarly, if there had been the kind of rebalancing that happens in the USA (where states like California pay to subsidise development in states with weaker economies via the Federal government), the rebalancing would have happened from the other end.
                Instead, the Germans decided that they wanted the benefits of the Eurozone without the costs. And then it broke and they complained.

                No, the germans didn't want to be on the hook for the decisions of others. Then others screwed themselves, and demanded that the germans bail them out - which was explicitly not what had been agreed. People tried to paint the whole country of Germany as a collection of crypto-nazis for not just making it all go away, which is a ludicrous attempt to rewrite history.

                It would have served them all right if Germany had simply said: "Fine, we'll bail you out. And by the way, we're done with the Euro. We're going back to the Deutschmark because obviously you idiots shouldn't be trusted to run a birthday party, much less a country. Don't call us again."

                Germany would have been fine, with a currency just as strong as the current Euro, and the rest of the eurozone would have been screwed like a five dollar hooker when the navy's in town.

  • (Score: 1) by khallow on Monday October 17 2016, @04:08PM

    by khallow (3766) Subscriber Badge on Monday October 17 2016, @04:08PM (#415237) Journal
    I wrote:

    What's the message supposed to be here? I was replying to a comment that advocated making banking state-controlled. Now we have an example of a state-controlled bank extorting a weaker state. Is that supposed to be a benefit of state-controlled banks?

    You wrote:

    This was arranged by a state-controlled bank

    Ok, what's not clear cut about it? You just agreed that's exactly what happened. Let's look at your "but":

    but only because they were effectively blackmailed by private banks saying that they'd go out of business if Greece defaulted and this would have serious knock-on consequences for the relevant economies

    Blackmail doesn't mean that for starters. And why should the rest of the EU prioritize Greek fools over their own banks? It's a traditional exercise of state power furthering self-interest. Moving on, you wrote:

    The solution is probably to split up the banks and make sure that central banks have enough capital to bail out individuals when a bank fails.

    Not a word about Greece just failing to deliver on its obligations? What other obligations can a state just ignore? Public pensions? Health care systems? National defense?

  • (Score: 3, Interesting) by VLM on Monday October 17 2016, @05:42PM

    by VLM (445) Subscriber Badge on Monday October 17 2016, @05:42PM (#415281)

    The solution is probably to

    Not make a commission based profit motive to make idiotic loans that will never be repaid but the fees can be collected up front.

    The problem with bank structure at this time is you can make money two ways:

    Commission off sales and uncountable number of fees up front (the German banks cleaned up here)

    Profit off the periodic P+I payments (the German banks are getting screwed here)

    Competent bank management maximizes total long term return by making loans as large as can be paid off to max out commissions and fees while still actually getting paid back to max profit on P+I income stream.

    The German idiots did something stupid, lets max out this quarters income by loaning anything to anyone and booking the commissions and fees today. Sure the bank will be bankrupt in five years because the P+I will never be paid back, but maybe we can get the government to bail us out, or magic will happen or who cares we got our bonuses five years ago and no longer work there.

    It would be a fascinating idea WRT bubbles and massive speculation and control fraud to try a regulation and profit structure where there is no income due to commissions and fees. It would certainly get rid of a lot of corruption and stupidity in the banking sector.