unemployment

Unbelievable Blindness.

So extremists parties all over Europe are poised to win elections. It is making the Davos crowd nervous.

And what else did you expect? This year income inequality is all the rage and everyone is positioning themselves as defenders of the common folk. Ray Dalio of Bridgewater Associates, a $160bn hedge fund, bemoans the danger of extremists parties emerging and urges the moderate parties to “do something about it.”

But him and other Davos attendees – all billionaires and movers and shakers – don’t take it one step further. They don’t call on themselves to stop fucking with the politicians, stop lobbying, stop asking for favors. They refuse to admit that the current scheme works like this: business interests lobby the politicians –> politicians act on it –> common man gets squeezed (asked to work harder, study more, take more loans, take more pay cuts, etc.) –> economy dives –> businesses ask for more favors and loopholes –> common man gets fucked even more –> politicians bring on austerity –> common man gets fed up – >extremist parties win.

But Ray Dalio doesn’t see it that way. He think that he stands outside from all this mess and just does his business. He thinks he can just ask mainstream parties to get its shit together and when they will everything will be back to normal. But the cycle has to run through. So when the extremists win the Davos crowd will have no one to blame but themselves.

Fuck’em. Try to do business with Syriza and Sinn Fein and UKIP. See how that goes.

Tom Perkins is an attention-seeking poseur.

If you are genuinely afraid of Kristallnacht, I mean really, seriously afraid that the unwashed will come to your mansion with pitchforks, then you should be doing something to avoid it. If you are not doing anything about it then you do not consider those threats to be serious and your goal is simply to grab headlines and upset a lot of people. If you are not a complete fool, you know that comments like this will piss off a lot of people and because you choose to do it anyway, I suspect you want to see the reaction. The public outrage that ensues is fitting to your worldview: you essentially create your own reality that didn’t really exist before you made those comments. People get pissed and you get to point finger at them and say: “See? I told you so. The 99% are intolerant of success.” Nice racket!

Anyway, I digress. I’d like to explore options for someone who thinks that Kristallnacht is really coming. Those option might include: leaving the country; try to make a deal with those in power; in some way placate those unwashed masses. Seriously, if paying taxes is as bad as a Kristallnacht, you wouldn’t think twice before packing, making a money transfer to Switzerland and leaving. When there is a threat to your life, even a profitable business won’t stop you, right?

Second option would include making a deal with those in power. The 1% would have to convince the Congress to pass a bill that will cut their carried interest tax rate from 20% to, well, whatever it is that they think is commensurate with fair treatment. Considering that 20% = Kristallnacht (a rather steep starting point, the next notch on that scale surely wouldn’t be a Civil Rights Act), a 15% would probably constitute an equivalent of Southern segregation (where the 1% would compare themselves to blacks) and a 10% – a soft discrimination and bigotry (where the 1% see themselves as women and gays). Because of the severity of the starting point, an almost vertical reduction in taxes would only be adequate to bring full satisfaction to those guys. There can be several reasons they do not pursue that option. There are not enough votes in Congress; Obama will veto it; there are plenty of loopholes to not pay even that 20% rate. Such lackluster approach is telling. I would expect a more forceful appeal to power if, you know, you were about to get killed!

Third option – placating the ingrates – seems like a viable one. The problem here is that the slogans from the 80s era that used to put a numbing spell on any signs of unrest among the working stiffs, stopped working in a past few years. It’s hard to accuse them of being lazy fucks and tell them to go get a job – a foolproof shortcut that used to silence any critic in the olden years. But today it seems like these lazy fucks want jobs after all. Now, again, let’s remember that the backdrop here is that your life and livelihood is on the line. You have billions in cash with nowhere to put it. Unemployed, like the zombies in the World War Z movie, are spilling over your fence, hungry for your blood. You put two and two together and throw money at them, in the form of employment. I mean it doesn’t have to be meaningful employment: you can create some stupid data entry or spreadsheet jobs for them for, like $30K a year. Who cares about the bottom line at this point? We’re talking about you staying alive!! The price for your life is a paycheck for those storming the gate.

Naturally, I’m engaging in extreme metaphors in seeking solutions, but only because the original parameters of the problem were just as extreme.

Because neither Tom Perkins, nor Sam Zell are inclined to do anything about it, except taunting the audience even more, is a proof that they are a bunch of attention seeking poseurs. If anything leads to “economic extinction” of Tom Perkinses, it will be Tom Perkins himself.

Growing Inequality Can’t Be Cured by Charity.

It’s very hard to make a connection between one man’s actions and the other man’s suffering due to those actions. For a hedge fund manager it’s difficult to link his actions to a suffering of a small town teacher. His thinking goes: I exploit market discrepancies, I make money and pay taxes, I donate to charity. He may even think: I am genuinely a nice guy and I really want to help. It’s hard to trace the root of the problems back to himself and his colleagues and industry peers. That would require the rethinking, perhaps painful and unwelcome, of his entire existential premise: is he as good for the society as he thinks he is? And if he’s honest with himself, he will realize that the answer is not necessarily yes.

I wrote recently about how hedge funds these days, rather than engage in honest betting on markets are instead seeking to extract value at the expense of the communities, bully others for value or simply seek rent opportunities. None of those activities produce anything of value; they strip value from the existing caches. Then they use various tax loopholes. And then they donate to charity, being under the illusion that it can cure social ills and because, you know, they are not monsters.

That’s the model we’ve had for some time.

But here comes the danger. In another illuminating Bloomberg article (Bloomberg columnists are really on a roll, finding their mojo recently), we’re risking societal breakdown if we continue on the present course. This sentiment has been widely explored on the pages of my blog, but this article summarizes my thoughts in a concise and trenchant manner. Over the course of history many societies have reached this point. Many got out of this rather unscathed, if they embarked on the policy of alleviating the social and economic discrepancies (New Deal), many others have experienced a more painful chain of events.

I want to stress, again and again, that helping the poor does not turn us into Commies and socialists. It merely helps smooth out such transitions, it is in the very interests of those hedge fund managers. Blaming the poor, the unemployed and food stamps recipients on the lack of alpha is disingenuous and counterproductive.

Powerful Pretending To Be Powerless.

It’s becoming a recurring theme: men of power pretending or even believing to be the little guy, sort of “Mr. Smith goes to Washington”-type, speaking truth to power. Here’s a Republican congressman from TX, who supported the shutdown, telling park ranger “How do you look at them and deny them access?”, referring to a group of WWII veterans trying to enter the memorial. Unbelievably, he blames the poor park ranger (who probably doesn’t even get paid because of the shutdown) for the shutdown!

This kind of behavior is common among the “trickle-down” and Ayn Rand crowd: they blame the hoi polloi, the Joe Schmos for their troubles. But in order to not look like complete assholes, they have to turn everything around and pretend that it is them who are the little guy, the salt of the earth, and it is those food stamp recipients, the unions and the unemployed who are the real threat.

I think that for some, and Krugman made a good point about it recently, it’s not enough to just be rich and powerful. One has to be adored and admired. It’s like the next step after you have amassed fortunes and made powerful friends and opened your own charity. Your next step is to become a hero, but since opportunities for heroism are limited, you enter the make-belief world, a parallel realm, where you are the persecuted minority and everyone else is out to get you. You find someone who can’t really fight back and make a grand stand.

What fucks!

Unemployed are more risk-taking and entrepreneurial than businesses

My latest article for policymic.

We hear about “uncertaintly” from business leaders on a daily basis. They can’t plan ahead and they can’t hire anybody. As if any business was ever about certainty.

So the unemployed took over where businesses have left off. There’s a $2 trillion shadow economy where people work for cash.