Arctic heat is coming our way. And fast!

The Arctic Ocean heat map seems to show that it is the Barents Sea that has warmed the Arctic, which has melted too much in summer, which has given us the new dominant weather patterns in the northern countries. The El Nino is most likely the disturbance of the long term La Nina drought pattern, with the likely mechanism for this disturbance being the Honga Tonga volcano - which changed the Trade Winds that drive Pacific heating. 

The question is, how did the Barents Sea get so warm? Answer that question, and you have cracked global warming (rather than global flooding and drought). Two separate systems.

I don't see Barents as cooling anytime soon - meaning we have reached the tipping point Climate has changed. It is not theoretical - and unless we ban gasoline in urban areas and for highway use - as well as concrete - we are stuck here. The operative question is how many people in the 110 degree weather zone have to die or flea before we do something like this?  

The first thing that will happen is the end to agriculture wherever the 110 degree heat has become the new normal. The only solution to staying there is indoor food plant growth and cloned meat and dairy (although goats and sheep may do good indoors. Growing pigs and cows that way has been a disaster.

Are future humans really our problem?

Given breakthroughs in life extension or a very reasonable belief in reincarnation, these problems may be ours, and not just those of our children. The important question for both the present and the past is not as much the technology as the human systems. Will capitalism transform us or kill us? Will we transform it, or kill it? 

Will government, on its own, be able to ban urban and highway use of gas burning cars, replacing them with electric (preferably tethered, rather than battery)? We can tether cars the same way we tether electric trains - and computer control of both (as well as limited access in urban areas) will end automobile deaths. However, until workers are more involved in consumption (as well as production) and government decisions, the comity of capitalists will never escape the power of big oil.

Why Inequality Starts Becoming A Problem Now | Economics Explained

The issue is not just who holds the money, but the control it buys them over other people. The distribution of things is not as important. Social Democracy can fix that piece. Without social democracy, however, capitalism is as fragile as the business cycle - or rather -the fiscal policy driven cycle of speculation and bailout.  

Government spending is the yeast of any society. In social democracy, people getting benefits for education and retirement, as well as household spending by government employees and contractors spread the money out in fairly equal chunks. No business assets are ever acquired without the prospect of household or government consumption (or exports). 

Financing, however, is not the same as investment. When taxes are cut, there is a financial boom, but it may not be in any way linked to actual investment in plant and equipment. Indeed, it probably is not. Financial booms take money out of consumption and put it into speculation. Making a deal becomes more important than making a product. Until this is absolutely clear in our economic discussion, we will continue to make the same mistakes decade after decade.

Mexico Will Not Be The Next China | Economics Explained

Mexico has two huge issues: no linkage between the floor industrial centers and the oceans and/or U.S. internal waterway system. Absent political unity, there is no chance of expanding the Rio Grande to provide this (were it even possible hydrologically - no adequate headwaters) AND no major rail hub in the southern US that could integrate Mexican rail and transfer adequate tonnage to rival Chicago.

Development of Mexico and Chinese workforces and subsequent political development would require domination of the US market by firms with employee ownership and effective control, combined with cooperative consumption and finance and a willingness to expand such a system to overseas subsidiaries and supply chains with transfer pricing based on an equal standard if living for each class of labor.

What Everyone Gets Wrong About Global Debt | Economics Explained

The business cycle (like the problem of overconsumption) are myths. The issue is public finance. When taxes on the speculation sector are too low (for example, the cuts by Clinton and Bush to capital gains and dividends), it becomes more attractive to bid up asset prices and to create "innovative" financial instruments. This also hurts the consumption sector, as it sucks money out of lower performing investments - which leads to a need for the Federal Reserve to lower interest rates - which also allow for yet more garbage in speculation.

The only good thing in the 2017 tax cuts is that they did not decrease the 20% capital gains rate, nor did they do anything to repeal the 3.88 Affordable Care Act taxes on non-wage income. While the Trump rates did decrease growth by 1% by giving small increases to the capital sector (again, at the expense of the consumption sector), going further down the road to ruin due to speculation in crypto and rental single family homes was suspended due to liquidity caused by the pandemic recovery efforts. Essentially, the already failing housing bonds were propped up for a different reason.

Be sure not to confuse investment in plant and equipment with speculation (which is part of savings, not GDP). This is the most important thing to know about the relationship between public and private finance. The reason for the slow and steady growth in the late 50s, early to mid 60s was the willingness to have adequate taxation in place.

When Clinton kept taxes up (although his late in the administration capital gains cuts did fuel the tech finance boom - not tech itself), it put leverage needed to speculate in jeopardy. Without the leverage provided by public debt, you cannot expand the asset markets beyond the natural funding of assets such as home loans and plant and equipment finance (which respond to future consumption, not financial costs).

When debt finances asset price inflation, a crash is soon to occur. Don't make the debt by taxing adequately and keeping the economy going by adequate government salaries, contracts and transfers and long term growth will occur without boom-bust cycles. The fly in the ointment is the election of Republicans to Congress or the Presidency, who cut taxes that fuel the cycle.

The economic model laid out in the video left out the influence of speculation as the difference between available assets and those related to GDP. Trillions of dollars are junk. When that junk collapses, it destabilizes the financial markets. Stop making junk and begin the process of transferring productive assets to employees and households with minimal leverage and  the junk sector can be reduced even further.

When debt finances illusory assets and the overpricing of real property (it is almost always about housing), then there is too much of it.

The ability to finance debt is related to the ability to pay it back. For example, when housing prices (most specifically location value) are at reasonable levels compared to wage levels, then housing can be said to be correctly priced. When it becomes impossible to afford land without speculative loan products, the price has become too high.

Public debt is owed in proportion to how government is financed - and the only way to really have big debt is to tax incomes. Without the income tax, America could never have become the world's banker. Unless China and/or Europe develop adequate income taxation that is linked in with the debt that backs their currencies, the US has a blank check. 

If Europe united its debt (like Hamilton did for the states) adn a continent wide income tax was created, then the Euro would quickly compete with the United States as the global currency of choice. Until CCP, Inc. separates the party from wealth holding and then taxes high incomes adequately, it will remain a third world currency.

Even with a blank check, US debt is not sustainable (at least if lenders knew what to look for) because the ratio between income tax revenue and the national debt is too large. There is a tipping point somewhere, although we have not yet reached it. The tragic thing about tipping points is that, once reached, the economy is in ruin. 

President Biden's proposals to raise capital gains taxes by 5% will deflate the asset sector in an orderly fashion. Not doing so entails extreme risk, especially to the holders of speculative capital.

On the asset side, government held debt is in the form of trust funds - which are usually revolving - retirement of civil and military workers and Social Security/Medicare. The latter is held mainly be recipients or future recipients. When recipients get the money, they will be part of the bottom income quintile (or the bottom two - but mostly the bottom). The public debt is held by financial assets, from federal reserve and bank holdings which are ultimately owned by depositors, long term investors and mutual fund/debt investors. 

56% of long term and deposit assets are held by the top 10% of households. 77% of bond and mutual fund assets are held by the top 10%. Following the same percentage relationships (which match AGI relationships for income taxation), the top 1% holds 56% of the 56% long term and currency assets (a quarter), with remaining 9 percent holding the other quarter.

The mutual fund percentages follow the same rule. These are the funds which are used for speculative investment. They are mostly held by the top 1% - with a huge amount owned by the top 0.1%. Note that I am only describing national debt holding assets. The national debt is not held in speculative stocks. This is why speculative stocks are inherently worthless. In bankruptcy, they have no value. This is why mutual funds hold national debt instruments.

The top 1% of income mark is generally $500,000 per year.  Ultimately, if the economy crashes because they pay too little in income tax, they will bear most of the losses - although working people will still have it worse off, absent robust social safety net protections or the kind of cooperative financial systems that keep the speculators out of the ownership of the workplace and housing sectors, i.e., cooperative socialism.

Let's talk about lab grown chicken....

Sustainable Development for Inner Cities and the Developing World

This summer, I am taking a graduate class in Sustainable Development at the University of Maryland. We read Glynn Cochrane's book, Festival Elephants and the Myth of Global Poverty. It gave a good insight on how broken the current system is - and why most development money is wasted on spending for economists and grant writers and NGOs, not the poor. If such schemes were tried domestically, the operators would be arrested for fraud.

This is not to say that we should not do development. Indeed, we must - especially as climate change displaces hundreds of millions of people on the rim of the Indian Ocean. The method I am advocating can also be done here. Those who follow my Center for Fiscal Equity site or our submissions to Ways and Means and Finance will find them familiar.

If we want real development, we need to build more apartment houses with classrooms and clinics on-site. There are ways to do passive air conditioning that are ancient involving the creation of air currents. We can recycle water. We can do energy from solar panels and wind. We can install dehumidifiers to make the tropics habitable. We can do hydroponics and greenhouses (and grow worms to turn black water waste to soil).

How do we build such things? The newest development in housing - which can be done in Africa, Indonesia or Philadelphia - is stackable prefabricated tiny homes. These can be built in country or imported. 

Unless we pay people to get educated, they will have opportunity costs that get in the way. This is true in South and Central America, Mexico, the US inner city, the Reservation, Africa, South Asia, Ukraine, Syria and anywhere that housing and education are subpar.

Where do we find the people (who would staff these apartment/schools). Train teachers, maintenance and nurse practitioners and have them pay back the education through paid service (pay them to go to school too). This can happen in the US or any other developing nation - and yes, given how empty it is and its inequality - the United States is a developing nation. 

For some jobs, like fixing dehumidifiers, an expert trains an apprentice while working, then the apprentice works as a journeyman then becomes a master to train new apprentices (and going from complex to complex).

How do we pay for this? We can both redirect aid from the World Bank/IMF/USAID/NGO complex - as well as from TANF and SNAP and pay people to get remedial education (including ESL) and pay the rent from these stipends. For the long term, we propose that in both the United States and the developing world, funds for education, family support (a child tax credit) and healthcare be raised using a subtraction value added tax. 

Any operation with employees would pay this tax, although for some employers, such as development projects above, the tax would be akin to a negative income tax. For this reason, in the developing world, this tax should actually raise money from all other employers, governmental and international governments and agencies. A local value added tax would also be levied - but with no tax exemption for government or development agency employees. For more information on these taxes, see the Center for Fiscal Equity web page backgrounder on Consumption Taxes.

One final thing, and this also goes for road building and water development, give GRANTS, not LOANS. Forgive the outstanding loans and turn any related bonds into US and other donor country debt - to be paid back by increases in progressive income taxes. In the US, EPA gives grants for water projects and the Army Corps of Engineers does not require repayment to build dams. Why is this not standard all over the world? We can do one of two things - make states take out federal loans for such facilities or quit giving loans to the developing world.

The Golden Rule works in development too. Indeed, it is the only way not to turn poor nations in Africa and Asia into Chinese client states.