The past couple of months have been busy enough that I haven't had time to post. Today I just want to post a handful of headlines from the NY Times from these busy days to give an overview of how the paper of record is documenting America's slide toward a more stratified, third-world-esque society.
"Low-Wage Workers Are Finding Poverty Harder to Escape"
"50 Years Into the War on Poverty, Hardship Hits Back"
"The American Middle Class Is No Longer the World’s Richest"
"Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones"
When you combine these stories with a few other Times columns from last year, a very clear picture emerges. People are having to work harder to keep up because jobs don't pay what they used to. If you're lucky enough to find work, you're not likely to make as much as someone just like you did 25 or 30 years ago, and there's a much better chance these days that you're living in poverty and relying on things like food stamps, heating assistance, or charity to meet all of your needs. The impact of this has been felt society-wide, as more and more people begin giving up looking for work where it doesn't exist and turning to disability, social security payments, or black market dealings like drugs.
Intuitively this makes sense, as it's not possible for all of us to get rich flipping houses (or make ends meet flipping burgers). Those parts of the economy that could be shipped overseas for cheaper wages have largely already left. Much of what remains here is being shifted to part-time work, contract work (without benefits), and temporary employment. When our largest exports are natural resources and our largest imports are everything "Made in China," it doesn't take much imagination to understand that the result of all our bottom-dollar shopping has been bottom-dollar jobs for those of us who can find them.
Those of us who can't are creating a large and growing underclass, typical of every empire in its stages of decline. It looks like the 20-something college grad living with his parents, who decided not to take a job because the wages were too low to justify moving out of mom's basement. Or perhaps those 12 million people who've dropped out of the labor force in the last seven years, dropping the number of people in the workforce to levels last seen in the early 1980s.
Monday, March 23, 2015
Friday, April 11, 2014
Coming Soon to a Trailer Park Near You: Investment Bankers?
The past few years I've taken to scanning the business press much more frequently than the stuff packaged for general consumption. Because of that habit I happen across stories that I otherwise wouldn't see, and it's a great way to pick out underlying trends in the economy.
This week I found just such a story on Bloomberg, where two themes I see in the broader economy come together in a nicely written piece with a cheeky pun in the title. The story focuses on wealthy people looking to invest money in a stable asset with reliable returns, which is a common tale in the business press. The two themes I find interesting that show up are only mentioned in passing, but provide the setting for the story that otherwise would not be told.
The first theme is the decline of the middle class in America. It's something felt across the country, as prices rise for most everything people need (or have convinced themselves that they do), while wages stagnate or decline as jobs disappear. It's generally not acknowledged in the corporate press in so many words, but there are some really clear lines in this piece that are refreshingly honest, like
"Weissman, a University of Michigan economics graduate, attributes his newfound calm to the supply-demand equation in the trailer park industry. With more of the U.S. middle class sliding into poverty and many towns banning new trailer parks, enterprising owners are getting rich renting the concrete pads and surrounding dirt on which residents park their homes."
Further down, we find this gem:
"The economics of mobile homes are particularly alluring to folks who’ve made their living in the markets. Many counties in the U.S. have banned or discouraged construction of new trailer parks because the inhabitants are poor, pay little in taxes and drain resources. Yet demand is higher than ever, new investors in the parks say, because so many people never got back on their feet after the recession."
and this:
"David Protiva, a former mortgage-backed-bond salesman at Kidder, Peabody & Co. and Donaldson, Lufkin & Jenrette Inc., now owns four trailer parks in Georgia. He’s noticed that until 2008, most people coming into his parks were moving up; they owned nothing before buying a trailer. Since 2009, half of his residents have come to him from conventional homes, moving down, he says."
The second theme this piece points out is that in a stagnant economy there is a general shortage of profitable investments, which drives the rentier class from their corner offices in Manhattan to the further fringes of the economy to keep up their incomes. For a sector that's grown accustomed to low-risk yields of 8% to 20% or more on invested capital, the transition over the past decade to a zero-interest-rate regime from the central bank with falling yields in other investments has been challenging. This theme has driven bubbles in real estate (residential and commercial), oil and gas drilling (complete with bundled and securitized drilling lease bonds for fields that don't break even), and now alternative energy (by the looks of it). There's also been a general trend toward high-yield bonds (back in the 1980s they called them 'junk' bonds) and ever-riskier stock and derivatives bets to find returns in an economy where there just isn't that much money to be made compared to all the people looking to make money off of already having it.
The movement of investment bankers and other Wall St. types into areas like trailer parks, storage units, tax liens, and privatized probation signals that they're willing to compete with the loan sharks and bail bondsmen to keep up their standard of living. As one interviewee in this week's story puts it, “I like to say I turned in my Rolex for a pinky ring,”
The general upshot for this theme is that at some point over the past decade or so, the US shifted from a growing economy (where the average investment makes money) to a stagnant economy (where the average investment breaks even, and decent yields can only be obtained in ever-riskier investments). The next stage is likely to be a shift to a contracting economy, where the average investment loses money, and obtaining historical yields is likely to require extraordinary measures, like graft or corruption or operating outside the law. When that next transition happens depends on many factors, but with energy prices high and availability declining, it is likely to be sooner than later.
This week I found just such a story on Bloomberg, where two themes I see in the broader economy come together in a nicely written piece with a cheeky pun in the title. The story focuses on wealthy people looking to invest money in a stable asset with reliable returns, which is a common tale in the business press. The two themes I find interesting that show up are only mentioned in passing, but provide the setting for the story that otherwise would not be told.
The first theme is the decline of the middle class in America. It's something felt across the country, as prices rise for most everything people need (or have convinced themselves that they do), while wages stagnate or decline as jobs disappear. It's generally not acknowledged in the corporate press in so many words, but there are some really clear lines in this piece that are refreshingly honest, like
"Weissman, a University of Michigan economics graduate, attributes his newfound calm to the supply-demand equation in the trailer park industry. With more of the U.S. middle class sliding into poverty and many towns banning new trailer parks, enterprising owners are getting rich renting the concrete pads and surrounding dirt on which residents park their homes."
Further down, we find this gem:
"The economics of mobile homes are particularly alluring to folks who’ve made their living in the markets. Many counties in the U.S. have banned or discouraged construction of new trailer parks because the inhabitants are poor, pay little in taxes and drain resources. Yet demand is higher than ever, new investors in the parks say, because so many people never got back on their feet after the recession."
and this:
"David Protiva, a former mortgage-backed-bond salesman at Kidder, Peabody & Co. and Donaldson, Lufkin & Jenrette Inc., now owns four trailer parks in Georgia. He’s noticed that until 2008, most people coming into his parks were moving up; they owned nothing before buying a trailer. Since 2009, half of his residents have come to him from conventional homes, moving down, he says."
The second theme this piece points out is that in a stagnant economy there is a general shortage of profitable investments, which drives the rentier class from their corner offices in Manhattan to the further fringes of the economy to keep up their incomes. For a sector that's grown accustomed to low-risk yields of 8% to 20% or more on invested capital, the transition over the past decade to a zero-interest-rate regime from the central bank with falling yields in other investments has been challenging. This theme has driven bubbles in real estate (residential and commercial), oil and gas drilling (complete with bundled and securitized drilling lease bonds for fields that don't break even), and now alternative energy (by the looks of it). There's also been a general trend toward high-yield bonds (back in the 1980s they called them 'junk' bonds) and ever-riskier stock and derivatives bets to find returns in an economy where there just isn't that much money to be made compared to all the people looking to make money off of already having it.
The movement of investment bankers and other Wall St. types into areas like trailer parks, storage units, tax liens, and privatized probation signals that they're willing to compete with the loan sharks and bail bondsmen to keep up their standard of living. As one interviewee in this week's story puts it, “I like to say I turned in my Rolex for a pinky ring,”
The general upshot for this theme is that at some point over the past decade or so, the US shifted from a growing economy (where the average investment makes money) to a stagnant economy (where the average investment breaks even, and decent yields can only be obtained in ever-riskier investments). The next stage is likely to be a shift to a contracting economy, where the average investment loses money, and obtaining historical yields is likely to require extraordinary measures, like graft or corruption or operating outside the law. When that next transition happens depends on many factors, but with energy prices high and availability declining, it is likely to be sooner than later.
Monday, March 31, 2014
Unidentified Projects
Erik Lindberg of Transition Milwaukee wrote an insightful post this week about the establishment's denial of the implications of peak oil for our society's future. In it, he brought back a graph from a few years ago that made me laugh. It's a rich enough image that it deserves a little post of its own.
This is from the US Dept. of Energy's Energy Information Administration's annual report from 2009 as parsed in a presentation (pdf warning) given in Washington, DC in April 2009. They were trying to square known sources of liquid fuels with known depletion curves and the projected demand growth of a business-as-usual global economy. Starting at the bottom of the graph, the projects go from the most secure (OPEC and Non-OPEC existing conventional oil fields) to the most speculative (Non-OPEC Unconventional and, my favorite, Non-Petroleum Unconventional Liquids).
Here we are in 2014, and according to this chart, we should be looking forward to an unrelenting decline in petroleum (and apparently Non-Petroleum Unconventional Liquids) supply for the foreseeable future. The EIA of course does not officially project this type of future, as their 2013 International Energy Outlook shows global oil extraction rising to 115 million barrels per day by 2040. Apparently these "Unidentified Projects," which represent the equivalent of official hand-waving, will somehow bring four Saudi Arabias' worth of oil to market to save the day.
That requires quite a suspension of disbelief, especially in the face of declining investment in oil extraction projects by just about every publicly traded oil company in the world. How does more oil appear if no one invests the money to find it, drill for it, pump it out, and transport it to refineries? Apparently by Unidentified Projects, which Unidentified Parties are investing billions of dollars to bring to market, at prices that cannot make profits for Exxon, BP, or Shell.
The most likely outcome is that those Unidentified Projects will remain unidentified, undrilled, and unexploited. That's because they either do not exist or are too small/poor quality/inaccessible to bring to market at a profit for the most aggressive profit-seeking organizations in the world. That means that each year going forward will yield a bit less energy for a society that has only known more and more energy every year since the industrial revolution some 250 years ago.
What does the lived experience of that feel like to the average person in the US? Rising gasoline prices, higher heating oil and propane prices, rising costs for asphalt, fertilizers, and other things made from oil are just the beginning. Because our government is desperate to keep the illusion of happy motoring alive, we've subsidized the burning of food in our cars (that's what 10% ethanol in your tank means), so food prices go up while packages of chips get smaller and more filled with air each year. More broadly it means that people have a harder time finding decent-paying jobs anywhere but the oil industry, because it takes more and more resources to bring ever-crappier oil deposits to market. Now that the oil majors are cutting investment, though, it would seem that even those jobs are likely to be harder to come by. It also means that the general standard of living in the US is declining, and that much of our infrastructure that was designed around a cheap energy economy has no future but as a far-flung salvage heap piled atop what used to be prime farmland.
Looking for a way to avoid such a troubling future? Trying to claw your way out of long-term unemployment in a stagnant economy that's increasingly offering only part-time or temporary employment? Struggling with student loan debt after going 5-figures in hock to have a shot at a career like your parents or grandparents might've had? If you find yourself in need of a decent-paying job in the coming years, it would seem that the EIA recommends looking for work on an Unidentified Project that will keep the national gas tank miraculously full.
Here we are in 2014, and according to this chart, we should be looking forward to an unrelenting decline in petroleum (and apparently Non-Petroleum Unconventional Liquids) supply for the foreseeable future. The EIA of course does not officially project this type of future, as their 2013 International Energy Outlook shows global oil extraction rising to 115 million barrels per day by 2040. Apparently these "Unidentified Projects," which represent the equivalent of official hand-waving, will somehow bring four Saudi Arabias' worth of oil to market to save the day.
That requires quite a suspension of disbelief, especially in the face of declining investment in oil extraction projects by just about every publicly traded oil company in the world. How does more oil appear if no one invests the money to find it, drill for it, pump it out, and transport it to refineries? Apparently by Unidentified Projects, which Unidentified Parties are investing billions of dollars to bring to market, at prices that cannot make profits for Exxon, BP, or Shell.
The most likely outcome is that those Unidentified Projects will remain unidentified, undrilled, and unexploited. That's because they either do not exist or are too small/poor quality/inaccessible to bring to market at a profit for the most aggressive profit-seeking organizations in the world. That means that each year going forward will yield a bit less energy for a society that has only known more and more energy every year since the industrial revolution some 250 years ago.
What does the lived experience of that feel like to the average person in the US? Rising gasoline prices, higher heating oil and propane prices, rising costs for asphalt, fertilizers, and other things made from oil are just the beginning. Because our government is desperate to keep the illusion of happy motoring alive, we've subsidized the burning of food in our cars (that's what 10% ethanol in your tank means), so food prices go up while packages of chips get smaller and more filled with air each year. More broadly it means that people have a harder time finding decent-paying jobs anywhere but the oil industry, because it takes more and more resources to bring ever-crappier oil deposits to market. Now that the oil majors are cutting investment, though, it would seem that even those jobs are likely to be harder to come by. It also means that the general standard of living in the US is declining, and that much of our infrastructure that was designed around a cheap energy economy has no future but as a far-flung salvage heap piled atop what used to be prime farmland.
Looking for a way to avoid such a troubling future? Trying to claw your way out of long-term unemployment in a stagnant economy that's increasingly offering only part-time or temporary employment? Struggling with student loan debt after going 5-figures in hock to have a shot at a career like your parents or grandparents might've had? If you find yourself in need of a decent-paying job in the coming years, it would seem that the EIA recommends looking for work on an Unidentified Project that will keep the national gas tank miraculously full.
Thursday, March 20, 2014
The Crappening?
For most of my life, things in America have generally not been going in the right direction. At least, that's what all of the polls have said when people are asked about the economy, quality of life, and the like. Author and blogger John Michael Greer refers to the process of the decline of our country as the Long Descent, which is appropriate. Much in the way that Global Warming as a phrase accurately reflects the impacts of increasing greenhouse gas concentrations, but misses the lived experience that most people understand (Climate Weirding is much more useful), the Long Descent accurately captures the impact of the decline of industrial civilization in the face of resource limits, environmental degradation, and cultural sclerosis. At the same time, as a phrase, it misses the daily experience for most people who will live through it (or not).
That sense of an accurate but misleading phrase to describe a lived phenomenon was nicely summed up by one of the regular commenters on Mr. Greer's blog on this post. "team10tim" wrote:
"We are living in the beginning of the long descent (though I call it The Crappening, the process of things getting gradually crappier, but it basically means the same thing: peak oil, over population, degraded environment, decline and fall of industrial civilization, coming dark age, overshoot, die-off, and bottleneck. People tend to have a poor ability to handle the verbose explanation, but my friends and family, peers and coworkers seem better able to handle the scope and scale and time frame when I call it The Crappening)."
That's the point of this blog: to discuss the trends that are shaping our future on the road down from the peak of oil extraction 8 years ago. People may not get that oil extraction rates have been essentially flat since late 2005, especially with all the hype in the news about the shale boom in the US, but everybody understands that oil prices have gone up and a lot of people can't afford to use as much as we used to. People may not know that real wages have declined for most working people since 1973, but everybody understands that by and large we're working harder but still falling behind economically. People may see official unemployment numbers dropping and wonder why so many people they know still can't find a good job, and plenty of people in their 20s and early 30s are still (or once again) living with their parents, postponing marriage and childbirth, or working part-time or low wage jobs because there just aren't that many "middle class" jobs available these days. People may not understand the impacts of ethanol grain diversion, rising affluence in all the countries where our factory jobs got sent, rising population, and climate change-driven weather extremes on crop failures, but everyone notices when food prices go up or the same $2 bag of chips or cereal has a lot more air and a lot less food in it.
All of these trends are signs of the Crappening, and they all stem from the same fundamental disconnect between our way of life and the inability of the Earth to provide all of the things we want from it.
That sense of an accurate but misleading phrase to describe a lived phenomenon was nicely summed up by one of the regular commenters on Mr. Greer's blog on this post. "team10tim" wrote:
"We are living in the beginning of the long descent (though I call it The Crappening, the process of things getting gradually crappier, but it basically means the same thing: peak oil, over population, degraded environment, decline and fall of industrial civilization, coming dark age, overshoot, die-off, and bottleneck. People tend to have a poor ability to handle the verbose explanation, but my friends and family, peers and coworkers seem better able to handle the scope and scale and time frame when I call it The Crappening)."
That's the point of this blog: to discuss the trends that are shaping our future on the road down from the peak of oil extraction 8 years ago. People may not get that oil extraction rates have been essentially flat since late 2005, especially with all the hype in the news about the shale boom in the US, but everybody understands that oil prices have gone up and a lot of people can't afford to use as much as we used to. People may not know that real wages have declined for most working people since 1973, but everybody understands that by and large we're working harder but still falling behind economically. People may see official unemployment numbers dropping and wonder why so many people they know still can't find a good job, and plenty of people in their 20s and early 30s are still (or once again) living with their parents, postponing marriage and childbirth, or working part-time or low wage jobs because there just aren't that many "middle class" jobs available these days. People may not understand the impacts of ethanol grain diversion, rising affluence in all the countries where our factory jobs got sent, rising population, and climate change-driven weather extremes on crop failures, but everyone notices when food prices go up or the same $2 bag of chips or cereal has a lot more air and a lot less food in it.
All of these trends are signs of the Crappening, and they all stem from the same fundamental disconnect between our way of life and the inability of the Earth to provide all of the things we want from it.
Subscribe to:
Comments (Atom)