You: Statistical Outlier

Ever wonder why, when you wake up in the morning, you have fresh running water, or delicious food you can cook or buy? Ever wonder why you get to sit in an air-conditioned setting on a 104 degree day. Is it because you are a raging success? Is it because God loves you more than say, the Somalians? Or is it perhaps that you simply happened to be a member of the lucky sperm club? The fact that you were born here, or in Europe, rather than in Bangalore, has far and away the most impact on why your life rocks --- for now (rocking being a relative term). But as the market implosion of 2000, 2008, and now 2011 demonstrate, things built on luck and pipe dreams and folly, eventually get arbitraged away by that funny little thing called mean reversion (no pun intended). And the reversion your about to experience will be mean, cruel, and ruthless. Oh it seems like a grand occurence now, but when someone pens The History of the World - Condensed in say, the year 2235, your existence and the mean reversion you experienced will be but a blip. Perhaps a couple of pages at most. See, mean reversion happens all the time in a historical and statistical sense. Its nothing new, rare, or strange. You got laid 3 times this month? Odds are, unless you are Brad Pitt, you probably won't get laid again till New Year's Eve. You made $2.5 million in 2007? Odds are you will not see that kind of jack again, well -ever. You are a 3rd generation industrial tycoon heir? Well, in a few of generations, there's a fair chance your descendents will be working at Wal-Mart. That's just the way random shit happens.

Here Come the Robots

In "The Graduate", Dustin Hoffman is advised by an older family friend to get into "plastics". If they ever re-made that film, they'd maybe say get into "robots". Mexican laborers may seem cheap compared to American workers, and Chindian workers may look like a bargain compared to Mexicans. But Everyone is expensive compared to robots. Robots don't unionize, get sick, need 401k's, or insurance. They don't get pregnant or cancer. And perhaps most importantly for FoxConn (they make all the iphones and related gadgetry), Robots don't jump ot of windows (unless directed too). See, Foxconn recently had to install nets around their buildings. Turns out too many employees were jumping out the window during their shift. After a bogus PR campaign that included the CEO walking around the factory floor, giving 20% pay hikes across the board, and a bunch of hand-shakes, some genius at FoxConn decided enough was enough. Let's just bring in the robots. So the company announced their intention to have a million robots working for them within 3 years. They omitted their 5 and 10 plans out of fear that the nets may not have been strong strong enough to support all their workers jumping out simultaneously. And if Chinese workers are screwed, then you are REALLY screwed. Here you are, preparing to do battle over the rest of your life to better prepare yourself for the New Normal/Economic Blitzkrieg that is surely coming; that is, the lowering of your Standard of Living as that of the Chindians rises meteorically. Your plan was to minimize the pain and hope to meet all those other guys somewhere in the middle. Only, Robots change all that. With Robots, there is no middle. Just an abyss. You're gonna hit terminal velocity soon. The thud will be horrific.

Of Napkins and Sweet n Lo

Dining at a relatively upper scale restaurant, one frequented by trendy zip code retirees and stay at home moms in Land Rovers, I've been noticing something: They all head out with a wad of napkins and artificial sweetener. Hell, I'd expect this this at the Taco Bell. Taco Bell napkins and my ass were well acquainted in college. But that was college. And that was Taco Bell. This is the golden age. This is a French restaurant. These people are driving Lexus'. A recent poll said 64% of all Americans do not have enough saved for a $1,000 emergency. If that's not third world, I dont know what is. This reminds me of the moment in 2002 I realized we had a housing bubble. $2 million dollar homes had beat up Mazda trucks and rusty Corollas in the driveway. That didnt "fit". And people in trendy zip codes hoarding napkins doesnt "fit" either.

A Global Economic Hit (Part the First)

"By the way, I took care of that thing for ya . . . "

Pete (the Killer), Goodfellas (1990)

The S&P has downgraded U.S. treasuries for the first time in history, but it is also probably the first time in history one of the principal owners of the S&P is one of the largest supporters of a presidential candidate running against the current president.  Harold McGraw is a principal of McGraw-Hill, which owns Standard & Poor.

And so the numbers come crashing and crashing downward, and it really leaves you to wonder.  What if there were no "economies" and "markets" churning in computer servers with green and (mostly) red digital numbers.  There would still be a bunch of people with a demand and a bunch of other people with the ability to meet that demand with supply.  Is this not an economy?  What grand bargain did our governments strike to take away this self-evident truth, that we are, in essence, the economy?

This question led me to ask further questions about government debt.  I have been in awe at the recent feverish, insane hysteria of austerity.  It reaches everything.  You would think money is a bad thing the way the media has hoi polloi barking like a rabid dog at anything even remotely resembling debt.  What has hoi polloi so set off?  And why?

Certainly, the way hoi polloi laps up the ideas it needs to think directly from the media, whatever it is telling us should be telling in revealing what has put us in the unenviable position of being victims of all of these failing numbers, and this strange "economy" that exists apart from us, yet inexplicably holds us all indebted to it.

The author of Confessions of an Economic Hit Man writes recently that what he had done for the U.S. decades ago has now evolved and transformed into a hit on all of us.  He talks recently about how that growth model is now being used by global corporations to enslave even Americans.  But that is far too complicated for our purposes here.  Our question is what happened to our economy?  You know, you and me making and serving and selling, and used-to-be, getting paid.

The reason why the hoi polloi are calling for the dismantling of their governments is because the corporatists want to take over the work, the economic muscle and financial remuneration, from these governments.  John Maynard Keynes knew that governments play a role -- and are meant to play a role -- in the economy.  The modern state must maintain a government, and inevitably that government becomes one of the biggest players in the economy.  On the global scale, these governments wield an extraordinary amount of power, not only themselves, but their relations to corporations contractually, as they hire contractors to perform for the government, and regulatory.

Worse, when the corporatists get into trouble, they have the governments bail them out, and hoi polloi pays for the bailouts.  That is why these governments are all so massively in debt.  Defense spending?  Corporatists.  War financing?  Corporatists.  Banking and financial speculation?  Corporatists.  Infastructure or human services?  That doesn't make the corporatists any money, so you can forget it.

You see, the corporatists have hoi polloi calling for their own enslavement.  It was a brilliant plan, a global economic hit on hoi polloi.  And the killers even made their prey like it.