The libertarian era has come in the USA

Risk assessment is a key procedure for business. To provide safety, i.e. mitigation of major risks for a reasonable price, for all stakeholders of a given business one needs profit assessment and revealing/ understanding risks. Since the desired safety level depends on business profit and expenses related to risk mitigation one looks into the profit forecast and long term statistics of risks to decide on business perspectives. Both, the COVID-19 pandemic and socio-racial protests enhanced by robbery and looting, have dramatically changed both sides of the balance – for the majority of people and businesses the mid-term profit is much lower than that was estimated in 2019 and the risks for many businesses have been increasing since February 2020. For example, business-related to outdoor food and hospitality will likely be suppressed due to increased insurance payment and reduce profit forecast.
The major beneficiary in this situation is IT-companies, which benefit on both sides – their capitalization has been increasing since the deep local minima in February-March due to the lockdown and their risk assessment has been decreasing since these companies have moved to remote work. The latter means no risk for the IT-companies – everything is online. Easy money made their thoughts thin and they support protesters – longer and bloody protests will bring more and more money – this is a magic dollar printing machine.
Lucky IT-companies (and few others), but many other businesses will suffer more and more. Industrial companies will have problems with increasing risks of pandemic pressure and the personal safety of workers. Credits will be harder to get due to increasing risks and debts rising since February. Protests- looting-robbery -… will affect people who have to drive to work instead of sitting home with laptops on top of their laps and with caps of coffee. All in all, the next stage of economic growth will not be with industrial companies (good for IT who can prolong the protests and suppress industries, which likely support Trump). I have to say that the support of protesters creates a moral hazard situation. This is a declaration of war to suffering industries.
However, the real dark time comes to laypeople with lower incomes. Both, the COVID-19 pandemic-related lockdown and slower recovery due to protest disordering will make these people poorer and much poorer. The income loss alone puts their lives at risk and this is the existential risk for tens of millions. But this is a smaller risk to my mind. The actual risk is that law enforcement troops like police and sheriffs are in the process of replacement by private security service (e.g. Minneapolis City Council members). This is a fully libertarian idea that lower-quality human beings have to sell workforce to higher-quality human beings and no social/governmental services have to exist at all. This means state deconstruction. The USA will be the union of self-assistance.


Why American political institutions do not work?

S. Huntington defined institutions as  "stable, valued, recurring patterns of behavior".  Everybody in this universe believed that the American institutions are stable and the most valued patterns of behavior. Just a few months of COVID-19 broke the shell of polished lie. The American institutions is a fake news. This happened not because the depression of the longer home stay without pay had to be channeled into the rage of racial and social riot. This happens because the discussion of institutions was just words about the institution and there were no recurring patterns of valued behavior in many organizations and procedures. The labor income share fall in the 2000s reveals an important process - the US institutions tried to cover the globe (the  whole world is not enough) and a larger part  of the US society was eliminated from this institutionalization process as insignificant. The set of social organizations and procedures was reduced to suppression of potential protests by various means from rough vocal statements ("Basket of deplorables" ) to law enforcement ("Occupy Wall Street") instead of resolving crucial problems of the racial, social, and economic inequality.
The US institutions failed because there is no consensus in the society. The organizations and processes are still alive, however. And they fight now not for institutionalization of new and adequate "patterns of behavior" within the USA but for power and money. And this war will be costly to all organizations but most painful for the US society.     

The American dream is dead - work does not make your life

On December 30, 2019 I published a post "The labor income share plummets" where a simple graph was shown - the evolution of labor income share in the USA. I also started the December 30's post with a few banal words - One needs just one graph to understand the increasing stress in US society (data from the BEA -Table 1.10. Gross Domestic Income by Type of Income). Now it is clear that the observed trend in the labor income loss had dramatic progress into 2020 with the COVID-19 pandemic. Two negative processes resulted in the revolutionary racial and social movement. No data on income share is available but the unemployment rate and the fall in GDP suggests that the curve may well drop below the 1929 level. The rage related to the loss in labor income was enhanced by the stock market stability - the Fed has fed the richest investors with trillions. Rich people become richer when poor lost the last hope. The American dream is dead -  work does not make your life.



No Founding Fathers any more - justs parents 1,2,3 ...

Hurrah, tolerance reigns. The USA does not need the Founding Fathers who do not comply with the moral level of the current time. Now they have to be called parents 1,2,3 ...


David and Goliaths: COVID-19 fights

Experts have been discussing the second wave of COVID-19 since the start of the first wave. Today we observe a surge in the number of new cases in several countries who likely passed the first wave. The USA  is one of the biggest examples with the second large daily increase of 38386  (https://www.worldometers.info/coronavirus/#countries) new cases yesterday, June 24. When one digs into the state data, however, the pattern is different - this is the first wave that came to California, Texas, and Florida - the biggest and wealthiest states. The growth rate is above 5000 per day and does not show any sign of plateau any time soon.  New-York and New Jersey are burnt out but the crisis is far from the end and the biggest state economies of the USA are under increasing pressure. The Dow-Jones Industrial Average lost 2.7% but the COVID-19 news today is much worse than yesterday. The trend is close to exponential and new quarantine becomes mandatory.

Israel is an example of the second COVID-19 wave. During 30 days in May, the daily rate of new cases was between 7 and 70. Yesterday it was 532 new cases and the exponential growth trend. Israel does not declare new quarantine because of important military and political move on July 1. The annexation will\likely cost quite a few lives of Israeli citizens.

Obviously, COVID is not an anagram of David, but very close. This small virus hits the foreheads of the biggest powers. 


Is there any difference between the USA slavery and current US foreign policy?

I find no difference between historical slavery in the USA and the current US foreign policy. The idea of slavery is based on the absolute superiority of white men over other human species (even white women). This presumption led to the possibility to treat them like animals. The idea behind the superiority of the US over other countries is based on the same presumption - the long-term US experience shows that other people do not deserve any compassion.  Actually, this compassion exists in the reverse order of their other countries possibility to harm the USA.
In this sense I do not understand why people in the developed countries outside the US protest against slavery, not against the USA, which considers them as serfs. The only reason I can see behind such behavior is that all developed countries consider less developed countries as slaves. This is a long term tradition and to blame historical slavery is easier than the current suppression (nonequivalent exchange).
Instructively, the countries outside the well-known slavery-involved club (remarkably this the club of the most developed countries and their fortress-bank-countries) do not follow the protests against slavery. They have no guilt feeling and can blame only slavery beneficiaries, i.e. the USA, the UK, Japan, France, Belgium, Spain, Portugal, The Kingdom of Netherlands, etc. However, some US satellites have the slave-master relationships in a different incarnation: subsidies from the EU or trade agreement with the USA  still rule this world and blaming the slavery beneficiaries is risky for their subsidies. The satellite opinion means nothing - these countries are like slaves.
A few countries are free from the slavery guilt and subordinate bonds. These countries can blame the historical slavery beneficiaries and the current US foreign policy considering others like slaves. Why don't they do that?


What do we need to overcome the next pandemic?

The current COVID-19 pandemic harvested hundreds of thousands of lives and ruins economies. The authorities and societies are not prepared at all.  Some "smart" countries like Sweden, USA, UK, Brazil, Belorussia first decided not to react and consider the pandemic as a regular seasonal virus attack. This approach led to huge losses that will be scrutinized in the legal process later on. So, what did we miss when we have been not preparing for the pandemic? I have my own list and some simple remedies not to allow this situation again.

1.    When something unknown happens the reaction has to be the most conservative. Experiments on the whole population are prohibited before we understand how to mitigate the risks. Politicians have to make people’s lives the highest priority.  I would not vote for a politician who says that GDP is more important than lives, especially the lives of vulnerable people.

2.    The medical authority first. The reaction to the pandemic has to be similar to the reaction to war. Politicians may declare war but then strategy and tactics are controlled by militaries. However, medical strategy and tactics were not ready this time. The threat was underestimated and the reaction was inadequate on average. This is the bottleneck for developed countries that presented a full variety of stupid responses.

3.    State resources. To successfully fight against this and the next pandemic one needs resources for mid-term measures: medical army of doctors, nurses and other crucial personal – with extensive reserves, and medical facilities to treat sick people, medicine, teams, and tools to create vaccines,  etc.

4.    Comprehensive measures to protect people involved in essential jobs: police, firemen, post, food supply, water supply, army, delivery, etc. These people suffered the most after medical personal during this pandemic. These measures have to cover the whole cycle of their job and also cover the way to and from work to home. This is crucial since there is no way to make these jobs remote.

5.    A set of tools and measures of individual protection. This was the weakest point during the COVID-19 pandemic. People lost their jobs and the global economy returned to the earlier 2000s because people had not enough masks, gloves, protect costumes, measures, and places of decontamination. This is relatively cheap. At least it is cheaper than the GDP loss we suffer.

6. The social response was adequate and the overwhelming majority followed all protective measures. However, there are a not-negligible amount of people whose behavior endangered all others. I do not know legal ways to protect people from this psychopathic threat, but it seems to be one of the most dangerous channels of virus distribution.    
7.    Children. This is the problem that one cannot resolve. Children are likely the most effective and uncontrolled way of virus progress in society.

I am sure that people react to incentives and there is R&D activity around which is aimed at all challenges including those in my shortlist. The next pandemic has to be less painful if we are able to react in a rational way. However, the reaction of the Federal Reserve System and the stock market reveals a rather psychopathic reaction to save capital not lives.


Western civilization = genocide, murder, slavery, torture, suppression, robbery, and ... hypocrisy

The current discussion related to Floyd's case unwinds and opens new horizons for the assessment of the basic morality of western civilization. The title of this post gathers some major features of western countries and their people, who excused themselves for that they were doing. I have no intention to describe what they have done during the last 500 years. Just a list of countries hiding their history in the hypocrisy of elites and subordinates. I am sure that France knows exactly the crimes and has much to say about the UK and this is mutual as for any country from the list.

- the USA
- Australia
- New Zealand
- Canada
- Japan
- Portugal
- Spain
- the Kingdom of the Netherlands
- the United Kingdom
- France
- Germany
- Belgium
- Italy
- Denmark

Forgive me if I missed someone.


Can socio-capitalism be an alternative to socialism and capitalism?

There were two competing ideologies since the 19th century - capitalism and socialism. Capitalism is all about money and it is the most effective mechanism to increase ... capital. No people is mentioned in capitalism as an ideology. People serve to capital. Socialism is all about people as equal social actors and is aimed at social progress like resource equality to maximize  personal growth. No money is mentioned in socialism as ideology. Money serve to people.
The USSR failed as a system because it was economically less effective than the countries professing capitalism. Almost all resources in the USSR were divided between people to enhance human progress except those aimed at defense and protection.
The USA is an example of capitalism success - capital reins. The US people does not matter, however. The median real personal income has not been growing since the late 1980s. Capital seeks only the rate of own growth. Proportional share of resources for personal growth (education, health, sports, arts, etc.) is not available for increasing share of population. People are slaves of capital and this makes them angry. It makes angry the Rust Belt, the victims of slavery, and highly likely in the near future the Latinos invited to occupy the worst job positions. This is because people is not a part of capitalism.  

Western Europe is not a good example as well. It's wealth basement was also built during  the centuries of colonial robbery. Now these countries have to invite people from the former colonies to serve as ... servants. Nobody is happy for long time in such positions.

Finally, China has been chasing the pink unicorn merging both ideologies in one big pot: socio-capitalism. The Communist Party rules the society (distributes resources for personal growth) and also allows the capitalism to do its inhuman job. Currently, the human progress in China is as tremendous as economic. This makes the Chinese socio-capitalism a temporary alternative to both pure ideologies and this situation infuriates the capitalism ideology.  The USA and China compete on the brink of war. In the USA, the interest of capital prevents the hot war  phase so far. 

I am not sure about the stability of this socialism-capitalism symbiosis. Is it mutualistic, commensalistic, or parasitic. (I guess that inhuman always wins.) But I am sure that the competition between the global capital and this new socio-economic formation in China (likely some other countries with average economic development may follow this path as well)  has many reasons for various wars, including the civil ones. I do believe the mankind can win in this war against the global capital ... when kills itself. Instructively, no human beings - no capital.  


Race and gender income inequality in the USA: black women vs. white men

I wrote this paper five years ago and forgot about it because of the priority to work with the DPRK nuclear tests in 2016. Now it looks like an appropriate time to make it available for a broader audience and I published it on SSRN.  A larger part of this paper is devoted to modeling based on a mechanical model of income distribution and this part can be omitted by the reader as extremely specialized. There are important policy recommendations based on the facts of dramatic income inequality between white men and black women. The principal result - all people have the same capabilities, and the observed income disparity comes from the inadequate "frozen" socioeconomic structure of the US society. 


Income inequality between different races in the U.S. is especially large. This difference is even larger when gender is involved. In a complementary study, we have developed a dynamic microeconomic model accurately describing the evolution of male and female incomes since 1930. Here, we extend our analysis and model the disparity between black and white populations in the U.S., separately for males and females. Unfortunately, income microdata provided by the U.S. Census Bureau for other races and ethnic groups are not time compatible or too short for modeling purposes. We are forced to constrain our analysis to the black and white population, but all principal results can be extrapolated to other races and ethnicities. Our analysis shows that black females and white males are two poles of the overall income inequality. The prediction of income distribution for two extreme cases with one model is the main challenge of this study. 

Link to the full (pdf) paper at SSRN 

Some policy recommendations
As a principal result of this study, we propose to develop a responsible social policy aimed at the acceleration of real economic growth. Equal opportunity for genders and races to use the largest instruments of working capital will bring an immediate increase in real Gross Domestic Income, i.e. in Gross Domestic Product. The effect of this social policy will be also observed in the long-run before the distribution of instrument sizes over genders and race becomes even. Here we do not even say about the resulting social equality which will be the outcome of income equality between races and genders. This does not imply income equality between people, however.


People respond to incentives - new reality leads to breakage of fine social tissue

This is what I've got from the Internet on this phrase:

·       Incentive is something that induces a person to act [by offering rewards to people who change their behavior].
·       Because rational people make decisions by comparing costs and benefits, they respond to incentives.
·       Incentives may possess a negative or positive intention.

When the unrest in the USA and western countries fades away rational people will have to respond to numerous negative and positive intentions and to make many existential decisions:

- to reduce the risk of degraded personal and family safety;
- to reassess the short and long-term forecast of property the price due to geographical location and neighbors;
- to reassess the risks to business/job market;
- to reduce the risk to savings;
-  to provide conditions for better education and communication to children;
- many others

Considering the fact that the new unrest and related negative incentives are highly likely in the months and years to come I would not be so sure that the social stratification and self- and group-isolation due to racial/political reasons (which is the main driving force of the current unrest) will fade away.

Time of financial marauders

At the beginning of June 2020, the total US market capitalization was around 150% of the nominal US GDP. This level is close to the top 160% in February 2020. And it is a big surprise to almost all laypeople and professionals considering the pandemic and sudden drop in employment and GDP.  One clear explanation is that the Federal Reserve money may go only into the stock market because the real economic segment did not ask for such a tremendous amount of credits since 2008. The Fed's monies found their liquid way to the stock market - the only working mechanism of formal profit. The whole ocean of liquid assets brings some profit as the stock market grows. The Fed's money is credit money, however, which the debtors have to pay back at some point. When this time comes, the stocks have to be sold and ... Well, is it actually possible to sell stocks for 6-10 trillion dollars? When someone starts to sell the first portion of, say, one trillion, the stock market falls.
This market fall will be enhanced by the worldwide spreading COVID-19 pandemic wave, growing problems in the real economy (the USA and global), the LBM protests also conquering the US and other western societies, and the US presidential elections in November. All in all, this looks like a perfect storm approaching. All the stresses cumulate and create conditions most expected by financial marauders - the whole bulk of extra Fed money will disappear (as a soap bubble) and the first who start to sell stocks will get the largest part of cash. The bank will get extra money from the Feds - too large to fall. The poor small investors will lose everything. As always.
And as always, the marauders are the largest investors and banks (Long live to BlackRock!) 
I am in cash and worry about the risks for the banks where the electric signals representing my money  reside.  


Second COVID-19 wave in Austria?

Yesterday, June 5, there were 60 new COVID-19 cases in Austria. This number is similar to 58 new cases on March 10, just before the first lockdown was announced. Statistics for today will be reported tomorrow and we might be running into the second lockdown if there will be above 100 new cases, as was on March 11. 


Hollywood gave us movie stars protecting everything that matters. Where are these stars now? Reality does not comply with movies - the movie starts are the fake stars and Hollywood is actually Hollyfake. Of course, this is obvious and does not deserve another mention, just disappointment when this fake dream factory announced restart.

Police officers are not robots

I was trying to apply the liberal approach to human (and not only)  beings  with basic rules of freedom and fairness (as per Haidt) to police work. And found no reason for police officers to protect other people based on fairness to the police officers (they are expected to be violent to other people) and freedom of their ultimate choice to protect themselves. Now I understand that liberals consider police officers as robots with The Three Laws invented by Isaac Asimov back in the 1940s. However, police officers are not robots and, considering the liberal approach (i.e. no authority, no loyalty, no sanctity) they have to follow the opposite rules:

First  Law
A police officer must protect only own existence, also for the sake of people who love them.
     Second Law
A police officer must obey the orders given by the immediate commander only (not by any other human beings) except where such orders would conflict with the First Law.

Third Law
A police officer may not injure a human being or, through inaction, allow a human being to come to harm except where such orders would conflict with the First or Second Law.

I think the Buffalo police officers who left special team observe these three rules and showed their protest  to be considered as robots following The Three Laws. This gives me some optimism about what will happen in the US after the current unrest and protests calm down. I hope people will respect the police officers as human beings. Otherwise, the police will be fully demoralized. To protect people, the police officers have to demonstrate loyalty to the team and people, follow the authority of commanders, and believe that they may sacrifice their livers for better life for their relatives and others. Currently, the authority and society demonstrate that they consider the police officers as robots following the rules invented by Asimov.    


What frightens the most in the USA protests

US capitalism was an exemplary success for other countries for decades. It deserves all praises but we lost some frightening processes behind the polished face for the outer world.  This is the major turn from the industrial driver demanding more and more qualified labor (it took just a few decades to poison The Great Lakes for the sake of industrial growth)  to a monstrous mow quaffing everything. The US capital lost its inherent advantage of job creation because the economic efficiency is not technologically creative anymore - it is aimed at over-consumption through services. Job is not a measure of success. Now it is status consumption, which cannot cover the whole population. The US is not a country of consolidated progress - it is the country of separation and segregation. People cannot encash their capabilities to work and produce goods and services because their value-added is below the marginal cost for the most efficient capital growth. These people consciously or unconsciously go to protest since the standard democratic procedure does not work ( the last attempt was with Trump elected to return industry and lower increase the marginal cost by tariffs and so on, but the capital resistance is too strong). The current peaceful protest wave is the expression of the deepest fear in the hearts of millions lost jobs, losing jobs, or vulnerable to job loss. The US is not a good place for masters. And this conflict in the US society, which cannot be resolved in a democratic way with both parties struggle for the same consumption position not for economic progress, frightens the most. –°apitalism does not bite its own tail - it changes its skin. Nothing personal - just business.


Many people in the US are weak and worthless. They can only protest

The current protest wave in the US is driven by feelings of weakness and worthlessness. When people in democratic countries can change the status they do not like they go to elections and vote for the political power which can change their lives for better.  This is not what we see in the USA. The problem ignited fierce protests and violence has been tackled (but not solved) for centuries. It will not be resolved after this wave calms down - it cannot be resolved without political agreement on the importance to follow the recommendations of the UN (Alston) report - Report of the Special Rapporteur on Extreme Poverty and Human Rights on his mission to the United States of America
This protest is not a surprise and almost all countries in the world can give similar examples of weakness and worthlessness when interacting with the US. 

The mean income gap between white males and black females grows during the democratic presidencies

Two days ago, we compared the mean income evolution of the white and black population and demonstrated that the difference did not change mu...