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Category: Economic Data

Just reducing the workweek to 4 days would cut UK’s carbon footprint as much as if all cars were eliminated

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How much is wage slavery killing not only you, but the planet too?

Scientists have an idea, according to a recent article from the Guardian:

The introduction of a four-day working week with no loss of pay would dramatically reduce the UK’s carbon footprint and help the country meet its binding climate targets, according to a report.

The study found that moving to a four-day week by 2025 would shrink the UK’s emissions by 127m tonnes, a reduction of more than 20% and equivalent to taking the country’s entire private car fleet off the road.

That’s right. As world wide lockdowns to contain the pandemic suggested last year, reducing the work-week world-wide by just one day could basically end global warming immediately.

Wage slavery is killing you and the planet.

2020 reduction of labor hours led to 6% fall in carbon emissions

Carbon emissions fell at the fastest rate in the last 30 years, driven entirely by the reduction of hours of labor forced on countries by the emergency measures necessary to contain the pandemic.

The data shows that only an immediate and radical reduction of hours of labor has any hope of avoiding a catastrophic climate crisis.

Wage slavery has outlived its welcome.

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The entire German yield curve goes negative … again

Excess capital frantically scrambling for a way to avoid the abyss…

From Reuters:

Germany’s 30-year government borrowing costs fell below 0% on Monday, taking the entire yield curve back into negative territory for the first time since early February as euro debt markets tracked another leg lower in U.S. Treasury yields.

From one analyst on Bloomberg:

“There has been a loss of hope.”

Goodbye to Okun’s Law?

According to Wikipedia:

In economics, Okun’s law is an empirically observed relationship between unemployment and losses in a country’s production. It is named after Arthur Melvin Okun, who first proposed the relationship in 1962. The “gap version” states that for every 1% increase in the unemployment rate, a country’s GDP will be roughly an additional 2% lower than its potential GDP.

Wikipedia

On Friday, however, the Bureau of Labor Statistic reported that non-farm payroll employment fell by 140,000, including the loss of almost a half million jobs in the leisure and hospitality sectors. While, GDP is estimated to come in at anywhere from around 8.7% (Atlanta Fed) to 2.2% (NY Fed).

If the above GDP prediction holds true, output may be rising in the short-run, even as employment is falling. And if the two do not correlate even in the short-run, we (meaning those who live by selling their labor power) are going to need a bigger boat.

Okun’s imaginary correlation between GDP and employment growth was never a real thing in the first place, of course. It was a political gimmick to sell President Kennedy’s economic policies. Is it possible that it too might a casualty of Covid-19?

Oddly, for most of 2020, capital was trying to convert itself back into money…

The performance of asset classes in 2020 per visualcapitalist.com

For all the talk about what a great year “the market” had in 2020, while the population was dying by the tens of thousands and ten of millions more huddled in their homes, you would think stocks led the way as an asset class to have and hold for billionaires and their politician friends, but I was not surprised to find this was not true.

As the above chart from the visualcapitalist.com shows, the leading asset class in 2020 was not stocks, bonds and treasuries, but commodity monies, gold and silver, as it has been most of the period from 2001, when the present depression began, until the sudden stop of 2020 and beyond.

Apparently, capital no longer loves labor power; it wants to become simple money again. Or, perhaps, there is another explanation for this odd behavior.

Tracking the collapse of wage slavery in real time

Chart One: Permanent job losses compared in the 2001 recession, 2008 recession and the pandemic sudden stop

Above is a chart from Calculated Risk blog showing the estimated number of permanent job losses in the nine months since the sudden stop caused by emergency measures taken to contain the spread of the coronavirus in the United States. This number is produced by the Bureau of Labor statistics and should be taken with an entire box of Morton Iodized.

But they do give us some measure of how severe the shock to the market in labor power has been in a frighteningly short period of time. Already, just nine months in, the labor market has permanently lost 50% more jobs than at comparable periods in both the 2001 and 2008 recessions; it has already entirely exceeded the total permanent job losses of the 2001 recession.

Chart Two: Aggregate job losses and ‘recovery’ in various recessions

As chart two, also from the same source, shows, even with the alleged bounce in the so-called economy following the sudden stop, the market in labor power is still more severely impaired than at the worst depths of the 2008 crisis.

The severity of the problem in the market in labor power might be obvious to anyone who is following the weekly initial claims reports that are currently running four times “normal” and well beyond even the worst weeks of the so-called Great Recession.

I don’t usually care what bourgeois economists write, but the Calculated Risk blog usually presents mainstream consensus information. If you want to know what the mainstream thinks is happening, they are probably the least offensive to your sensibilities — not ‘right’, just less spin than ‘normal’.

Yeah, that fucking happened.

Yesterday oil futures closed negative for the first time in history. You probably are still trying to wrap your head around what this means. So I thought I would help you.

Here is a thought experiment.

Suppose you have an economy that is divided this way:

  • One of every 200 people is sufficient to feed the entire country.
  • Four of every one hundred people is sufficient to produce everything else needed by the country.
  • Together, about four point five (4.5) people out of one hundred are needed to produce everything needed by the country to live on.
  • The other 95.5 people are essentially superfluous to necessary labor.

Over time this 95.5 out of 100 people come to be engaged in all manner of pursuits that are economically superfluous, but absorb the output of the 4.5 of productively employed persons.

In other words, they create demand for the output of the productively employed persons.

This works fine, mostly. Growth is tepid, because real growth is only occurring in the sector of the economy that is productively employed. Growth occurs among the 4.5%. But it is measured in terms of the 100%. Say growth in the 4.5% is 40% — roughly an increase from 4.5 out of 100 people to 6.5 out of 100.

But no new investment is possible here in the productive sector owing to absolute over-accumulation of productive capital. So, there must be an increase in the superfluous sector. It must increase from roughly 95.5 out of 100 people to roughly 97.5 out of 100 people.

Although there has been a huge increase in the productive sector, this is expressed as a very small increase in the overall economy — secular stagnation.

You get the idea: additional investment in the productive sector is not possible, so there must be an increase in superfluous labor time. If there is no increase, there will be a crisis. New demand for this increased output must come into being. That is the state’s role — to foster new demand.

So, now we see how this works and how the two sectors relate to one another.

(Pardon me if this is a bit unclear. I’m working this out as I go along.)

Enter this virus; it emerges and sweeps the world market. The state shuts down “non-essential” businesses, which just happen to mostly reside in the superfluous labor sector. They reside, in other words, in the 95.5% of the economy that mostly create demand for the output of the 4.5% of productively employed capital. Let’s say the hit on the superfluous sector amounts to 20 people. So now, instead of being 95.5 units of demand, the superfluous sector has suddenly shrunk to 75.5 units of demand.

This is what the economists see.

But labor theory see something more.

Now 20 units of the sector that once were realized of the surplus value produced by productively employed capitals suddenly has gone away. A massive devaluation has taken place almost instantaneously. This is expressed in a mass of idle capital and an equally large population of excess workers. And it takes the form of both currencies and commodities as well.

Currencies have no value and when they fall out of circulation, they simply become worthless scrip. Commodities, when they fall out of circulation, have no prices and, we must assume, no values as well. They are not even social use values, i.e., use values for someone other than their producers. (But this term may be nuanced: what do I mean by the term, “their producers”?)

The damage to the forces of production does not end here.

The productively employed capital is not shut down; it continues to function as capital, to self-expand and to produce surplus value. The state, which does not hesitate to shut down restaurants, never steps in to shut down oil drills, farms and meat processing plants. These operations are self-evidently “essential” to any modern society, right?

Who in their right mind would tell an oil refinery to stop refining oil into gasoline, since commuters need the gasoline to get to work? Only, the roads are empty now. There are no commuters. And with the empty roads the air is clearing as pollution settles. Less gasoline is used to get superfluous workers to their superfluous jobs that no longer exist.

Soon, the pumps are silent. The gasoline trucks move less often. The refineries begins to shut down. The storage facilities begin the fill up. And still oil is being pumped. Because pumping oil is the production of surplus value and entire nations are dependent on the production of surplus value.

Finally, when oil futures go negative, speculators get the memo:

Capitalism is dead.

EPI on the so-called “slow-motion wage crisis”

Decline of manufacturing employment in absolute numbers and as a percentage of the labor force, 1939-2017. Source: EPI, U.S. Census

The Economic Policy Institute has produced a report, America’s slow-motion wage crisis, purporting to explain the decline in the living standards of American workers since 1979. The problem with this report is that it completely ignores the role unions played in abandoning the fight for fewer hours of labor:

For the last four decades, the United States has been experiencing a slow-motion wage crisis. From the end of World War II through the late 1970s, the U.S. economy generated rapid wage growth that was widely shared. Since 1979, however, average wage growth has decelerated sharply, with the biggest declines in wage growth at the bottom and the middle. The same pattern of slow and unequal growth continues in the ongoing recovery from the Great Recession.

In addition to grossly understating the decline in real wages since 1971 by employing the misleading Bureau of Labor Statistics consumer price index measure, there are real problems with the conclusions to this study.

The first problem is that with regards to the decline of manufacturing, it is entirely predictable based on Keynes theory of technological unemployment. That theory simply states technological unemployment is inevitable because the rate at which we are improving the productivity of labor is outstripping the rate at which we can find new uses for labor. Keynes clearly stated that this problem could only be solved by a progressive reduction of hours of labor.

The second problem is that the term, “full employment,” is meaningless. We have one objective benchmark by which to measure whether available labor power is fully employed or not: can the employment of additional labor power produce additional profit. But here we run into Keynes problem of technological unemployment, which suggests there is no use for the additional surplus product. If there is no use for the additional surplus product, it has no value, according to Marx. This situation can be disguised for a time by the wholesale destruction of the productive forces in a world war, as happened from 1936-1945, but it must reassert itself eventually.

The third problem is that if unionization is mostly concentrated in manufacturing and related sectors and those sectors are being eviscerated by technological unemployment, the natural tendency would be for unionization to decline unless effort was made in the opposite direction by labor unions and workers. For whatever reason (and there are many), we don’t see this.

Not surprising, union membership has been devastated during the period from 1983 to 2018:

Declining union membership, 1983-2018. Source: Bureau of Labor Statistics

It is this last trend that should make us pause at this point: historically, unionization is tied to manufacturing and related sectors, but these sectors are precisely the ones that were being eviscerated by technological unemployment and shedding massive numbers of union jobs during the 1970s. To save those union jobs, labor unions should have been pressing for a sharp reduction in hours of labor to address the effects of technological unemployment. Instead, the unions abandoned the fight for less work, with the devastating results we see today.

The year 1979 is in fact a pivotal year not only for the study, but in American labor history: that was the year the AFL-CIO and the Democrats celebrated the signing of the Humphrey–Hawkins Full Employment and Balanced Growth Act. Although highlighting full employment in its title, the act actually de-emphasized employment; giving priority to maintaining low inflation. Which is to say, after effectively abandoning the fight for a shorter work week in the 1960s, in 1979, full employment was abandoned entirely with the tacit approval of the labor unions.

Thinking about negative interest rates

I have used this chart before. It shows that, presently, many of the most important economies of the world market have interest rates that have plunged below the zero lower bound.

This event is so unprecedented in economic history that no one knows what to make of it. Prior to a decade ago or so, no one even thought it possible that lenders would advance credit at a loss. But here we are.

Germany bond yield curve, September 6, 2019 (Source: Trading Economics)

If Marxist theorists need any further confirmation that fiat currency doesn’t behave like money, they need look no further than Germany bonds, where the yield curve out to 30 years is now negative. Just try explaining, on the basis of Marx’s labor theory of value, creditors who lend their capital to the German state with the firm expectation they will incur a loss.

The only explanation that makes sense to me is that they are trying to avoid bigger losses of capital elsewhere. They accept a loss on the capital they lend to the Germany state to avoid losing more, or even all, of their capital elsewhere. In a commodity money regime, this situation could not happen. Alongside interest rates falling to zero, gold would be withdrawn from circulation into hoards. The two movements are driven by the same phenomenon — the falling rate of profit, which produces an ever growing mass of superfluous capital.

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If anyone but Trump were president right now, this country would be losing its mind…

What you are looking at in the chart below is likely the most frightening chart available to economists today: 10 year benchmark long-term government bond yields for Germany, France, Switzerland and Japan. The chart shows that yields for each of these countries has reached or broken through the dreaded zero-lower-bound.

I think, the implications of this chart are that most advanced economies of the world market are now firmly trapped in a deflationary death spiral.

10 year benchmark long-term government bond yields for Germany, France, Switzerland and Japan (Source: St. Louis Federal Reserve)

If Donald Trump were not president, economists would be losing their minds about right now. The reason they would be losing their minds is simple: the above chart shows that monetary policy is dead and U.S. allies have no real tools at their disposal to fight the onrushing catastrophe. Without a massive fiscal stimulus on order of World War II, the United States will quickly follow its allies into the abyss.

But a massive fiscal stimulus package at this time would guarantee the reelection of Donald Trump and no one wants that. So they have their fingers crossed.