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The Wrongologist

Geopolitics, Power and Political Economy

Auto Loan Delinquencies Are Rising

The Daily Escape:

Tetons twilight from Snake River overlook, WY – November 2019 photo by timtamtoosh. Ansel Adams once shot a picture from this spot.

From Wolf Richter:

“Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today….”

Total outstanding balances of auto loans and leases in Q3, according to the New York Fed, rose to $1.32 trillion. That $62 billion of seriously delinquent loan balances are what auto lenders, particularly those who specialize in subprime auto loans, are now attempting to either get to current status, or to repossess. If they cannot cure the delinquency, they’re hiring specialized companies to repossess the vehicles, which will then be sold at auction. And the repo business is booming!

The difference between the loan balance and the proceeds from the auction, plus all of the costs involved, are what a lender stands to lose on each delinquent loan.

Worse, lenders are still making new subprime loans, and a portion of those loans will also become delinquent, and a smaller portion of them will default. Wolf helpfully adds a chart that shows today’s level of delinquencies as a percentage of the auto loan portfolio is the same as it was in 2009, when we were in the middle of the Great Recession:

It’s useful to remember that in 2009 and 2010, the US was confronting the worst unemployment crisis since the Great Depression. People were defaulting on their auto loans because they’d lost their jobs. That isn’t the case today, we’re near full employment.

Let’s differentiate “Prime” auto loans and leases from “Subprime”. Prime auto loans have minuscule default rates. Of the total of $1.3 billion in auto loans and leases outstanding, according to Fitch, Prime auto loans currently have a 60-day delinquency rate hovering at a historically low 0.28%.

That means that most of the delinquencies are in the subprime category. In fact Wolf says: (emphasis by Wrongo)

“Of the $1.32 trillion in auto loans outstanding, about 22% are subprime, so about $300 billion. Of them roughly, $62 billion are seriously delinquent…around 20% of all subprime loans outstanding.

We know that the subprime delinquencies are not caused by an employment crisis or, by the brutal recession we endured during the 2008 financial crisis. Employment is still growing, and unemployment claims are near historic lows. But subprime auto loans are defaulting at very high rates.

What’s going on? It’s car dealers’ greed. They’re striving to sell more cars. Customers with a subprime credit rating have already been turned down when they try to buy things on credit. But, when they walk on a car lot, their bad credit rating is magically no longer an issue.

The dealers know they’re sitting ducks, who won’t negotiate. They accept the price, the monthly payment, and the trade-in value. They’re just happy to be in a new car. When they drive off the lot, they have a high monthly payment, which, since they already have trouble making ends meet, will soon be late, or in default.

The subprime car buyers really have little choice if they need a car to get to work. Poor people are smart about doing what it takes to survive: If you don’t have a down payment or a good credit rating, and need a car to keep your job, it means a bad deal is better than no deal.

They take the bad deal because if things get worse, they probably will only lose the car.

The kicker is that auto loans aren’t the loan category with the highest delinquencies. Student loans have even higher delinquencies:

  • Outstanding student debt stood at $1.50 trillion in the third quarter of 2019, an increase of $20 billion from Q2 2019
  • 9% of aggregate student debt was 90+ days delinquent or in default in Q3 2019

The student loans total of about $1.5 trillion, is higher than the $1.32 trillion of auto loans.

The system is broken. Someday soon, the job market will deteriorate. We’ll be back listening to why we should bail out lenders and investors who lend, securitize, and sell these loans to investors who are chasing yeild.

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Available Housing Drives Growth in Jobs

The Daily Escape:

Snow near Boulder, CO – November 2019 photo via

Last week, in our town’s Mayoral race, each side had a signature issue. For the Republicans, it was roads. For the Democrats, it was affordable housing. Wrongo has served on the town’s municipal roads committee for three years. He’s also attended a few town workshops on affordable housing. The incumbent Republican Mayor won in a landslide.

Did that mean that affordable housing was a non-issue? Not really. Like most of Connecticut, our town has a sharp income divide. And despite having among the most affordable housing in Litchfield County, we have elderly poor and younger middle-income people vying for limited multifamily housing stock.

The major problem is a concern that affordable housing equals more kids in our schools, and more infrastructure. The reality is that the incremental real estate taxes that landlords would pay the town will not offset the increased costs of schooling and infrastructure.

But, the town also desires greater economic development. New businesses and jobs are important to increasing our tax base. We’re not alone in this. Consider the city of San Jose, CA. The Silicon Valley region has added about 385,000 new jobs over the past five years, but only approved about 60,000 housing units. From Vox: (emphasis by Wrongo)

“Communities sometimes mobilize in opposition to some kind of new project, but this…happened when someone proposed building some offices near a new football stadium in Santa Clara, California, is mind-boggling: San Jose has taken the rare step of publicly opposing the project, saying it would add far too many jobs, exacerbating the region’s housing shortage.”

It’s difficult to believe that we’ve reached a point in our economy where creating new jobs can be construed as bad for existing residents of an area.

The Bay area isn’t overbuilt with housing. San Francisco is less densely populated than Brooklyn, NY. Santa Clara County, where Silicon Valley is located, is significantly less populated than the Long Island suburbs. The fear is that meeting the need for housing will lead to many lower income residents living in high-rise buildings.

Or take New York City, where Amazon was shocked when the public said that Amazon could take their 25,000 new jobs and shove them. (brackets by Wrongo)

“It’s only natural that Amazon saw its promise to create 25,000 jobs as a blessing, for creating jobs is most [all] of what we have ever asked of American companies. But given the realities of our economy…. it’s also only natural that many New Yorkers wanted nothing to do with it.”

Promises of 25,000 new jobs in NYC sounded much different in 2019 than it would have sounded in 2009. If you’re among the sea of NYC hotel and restaurant workers, you know you’re never likely to be qualified for one of the jobs Amazon promised to create in your backyard. And since it would be built in an area where many hourly workers live, they naturally opposed what would have driven their costs of housing even higher.

Amazon already had 2,000 employees in NYC in November 2018, when the HQ search concluded. Despite not building a NY headquarters, that number has grown to 5,000 in the past year. Amazon’s continuing jobs expansion in NYC makes the case that those who fought against the state’s $3 billion dollar incentive package were correct.

No economic problem is simple, and neither are their solutions. Here is a good rule of thumb: When things are complicated, inputs are messy. Some factors may cancel out other factors.

And in the case of trying to increase economic growth in a given city or town, an available, skilled workforce in numbers sufficient to meet the new business needs is primary. Available housing is huge as well. These two inputs exist in a feedback loop. Our towns can’t grow if workers can’t find housing.

Freezing housing stock in a growing economy helps those who enjoy higher Socio-Economic Status (SES). Our cities are seeing an outflow of lower SES’s and an inflow of higher SES’s. This is making housing costs in our second-tier cities move closer to what they have become in NYC and LA.

Exurban ring towns like Wrongo’s are seeing inward migration, mostly of middle and lower SES’s who routinely commute long distances for work. That adds local spending on goods and services, but puts pressure on local housing stock and on schools.

The landslide results in our town’s election was a vote for better roads, and against changing zoning requirements to add affordable housing. Indirectly, it also was a vote in favor of lower economic growth, just like what happened in San Jose, CA.

But we shouldn’t be confused with Silicon Valley.

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Monday Wake Up Call – November 4, 2019

The Daily Escape:

Lake Sabrina, CA – November 2019 photo by Wild_NDN

All of a sudden, there are ongoing protests throughout the world. This seems to be an enormous story, maybe the biggest story of October, despite America’s focus on impeachment. And there’s some, but not a lot of media coverage. Here’s a map of the locations, and primary causes, of recent unrest around the world:

When you see the map, it’s clear that something’s happening. In some places, protesters are mainly demanding more political freedom, like what we’ve seen in Hong Kong. In others, like Iraq and Lebanon, people are sick and tired of corruption and unemployment. They want to throw out the old guard.

The map shows 14 countries, but others report as many as 22 countries experiencing protests in 2019. Can we find common threads to these protests?

They don’t show ideological consistency, although they do show similar tactics. Unlike Occupy in the US, these protesters have demands, which vary with each protest. In some places, they involve millions of people. They do not seem to be internationally driven, although the local powers that be often say that they are.

A Chinese friend of the Wrongologist who lives in Hong Kong provides lots of coverage on local violence. For our media, violence is always “breaking out,” or protests always are “descending into” it, but we rarely hear deep explanations for why it occurs.

Let’s look at a few reasons that transcend individual countries:

Economic Slump

This argument is true for Chile, Ecuador, Venezuela and Haiti in Latin America. It is also true in Iraq in the Middle East. Despite their differences, each country saw commodity-driven economic growth, followed by a slump or stall. Haiti, despite its own economy largely being stagnant, saw billions in aid from oil-rich Venezuela come in, then disappear when Venezuela had its economic issues.

Income Inequality

Jeffrey Sachs frames income inequality as social unhappiness and distrust, in Why Rich Cities Rebel: (brackets by Wrongo)

“Three of the world’s more affluent cities have erupted in protests and unrest this year. Paris has faced waves of protests and rioting since November 2018…after…President Macron raised fuel taxes. Hong Kong has been in upheaval since March, after Chief Executive Carrie Lam proposed a law to allow extradition to the Chinese mainland. And Santiago [Chile] exploded in rioting this month after President Sebastian Piñera ordered an increase in metro [subway] prices….taken together, they tell a larger story of what can happen when a sense of unfairness combines with a widespread perception of low social mobility.”

Gallup finds that while Hong Kong ranks ninth globally in GDP per capita, it ranks 66th in terms of the public’s perception of personal freedom to choose a life course. The same is true in France (25th in GDP per capita, but 69th in freedom to choose) and in Chile (48th and 98th, respectively).

It appears that traditional economic measures of well-being are insufficient to gauge the public’s real sentiments. The protesters perceive the politics behind the prices, and that’s what they are moving against.

Income inequality also shows up as withdrawal or repricing of government services. From the NYT:

“In Chile, the spark was an increase in subway fares. In Lebanon, it was a tax on WhatsApp calls. The government of Saudi Arabia moved against hookah pipes. In India, it was about onions.”

In Ecuador, the focal point of the protests was a demand for restoration of fuel subsidies. From The Financial Times (paywalled):

“The mass protests that have broken out during the past year in Asia, Europe, Africa, Latin America and the Middle East…are usually leaderless rebellions, whose organization and principles are not set out in a little red book or thrashed out in party meetings, but instead emerge on social media.”

Social media is the enabler for leaderless movements. When the Hong Kong demonstrations broke out in June, Joshua Wong, the most high-profile democracy activist in the territory, was in jail. In Moscow, Russia arrested leader Alexander Navalny, but demonstrations continued without him. In Lebanon, France and Chile, authorities have searched in vain for ringleaders. In Iraq, Muqtada al-Sadr, has emerged as the leader of the movement to replace Prime Minister Mahdi.

Underneath it all, whether we’re talking about people wanting political freedom or economic security, these riots are about class, wealth, and income. They are about the fact that all of these countries have very rich people who make the rules.

And their rules never favor the non-rich.

It is unclear if any of these protests will effect change. History rarely favors the man in the street.

Pro tip: If you are going to riot, take the time to head over to the part of town where the rich live, and riot there.

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Monday Wake Up Call – September 9, 2019

The Daily Escape:

Cape of Good Hope, 6:00pm, South Africa – September 2006 photo by Wrongo

Last week, the NYT’s Thomas Edsall discussed an award-winning academic study focused on the nihilism of the Trump GOP’s hardcore supporters. The paper illustrates that among this slice of the American electorate, the temptation to cause or support chaos may be overwhelming. Edsall says the study argues that a segment of the American electorate that was once peripheral is drawn to “chaos incitement” and that this segment has gained decisive influence through the rise of social media:

“The rise of social media provides the public with unprecedented power to craft and share new information with each other….this technological transformation allows the transmission of a type of information that portrays….political candidates or groups negatively…and has a low evidential basis.”

The study says that the chaos-inducing information transmitted on social media includes conspiracy theories, fake news, discussions of political scandals and negative campaigns.

The study’s authors, Michael Bang Petersen and Mathias Osmundsen, both from Aarhus University in Denmark, and Kevin Arceneaux, a political scientist at Temple, conducted six surveys, four in the US, interviewing 5,157 participants, and two in Denmark, interviewing 1,336. They identified those who are “drawn to chaos” through their affirmative responses to the following statements:

  • I fantasize about a natural disaster wiping out most of humanity such that a small group of people can start all over.
  • I think society should be burned to the ground.
  • When I think about our political and social institutions, I cannot help thinking “just let them all burn.”
  • We cannot fix the problems in our social institutions, we need to tear them down and start over.
  • Sometimes I just feel like destroying beautiful things.

The responses of individuals to three of the statements are horrifying:

  • 24% agreed that society should be burned to the ground;
  • 40% concurred with the thought that “When it comes to our political and social institutions, I cannot help thinking ‘just let them all burn”;
  • 40% also agreed that “we cannot fix the problems in our social institutions, we need to tear them down and start over.”

Despite interviewing 5,000+ Americans the study doesn’t conclude if the results represent the actual percentage of Americans who share this view. They did use a YouGov nationally representative survey of Americans. They say the data are weighted to achieve national representations on gender, age, education and geography.

As bad as this sounds, what if we reframed the “need for chaos” as “a need for things to change in ways that work for everyday people“? Instead of casting them as evil or as deplorables who wish to destroy nice things, we could see them as people who have been left out, or cheated by the system.

In that light, it might be reasonable for the marginalized on the left and right to wish for major changes in our system. So, let’s treat this study as an example of one dead canary in a coal mine. At this point, it’s a potentially terrifying glimpse of what may be America’s (and the entire developed world’s) future.

Nihilism is a symptom of needs not being met. Our current neoliberal capitalism is a prime cause behind this nihilism. Our system must change to be more inclusive, to create more “winners”.  We won’t blunt nihilism with more trickle down policies.

Time to wake up America! Our society has to change, or die.

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The Ethics of Responsibility

The Daily Escape:

John Muir Wilderness, CA -August 2019 photo by petey-pablo

Nobody in America should be rooting for a recession, and no political party should root for one either. Shame on those who are.

US economic policy is often driven by ideology, and those operating policies can change whenever the party in power changes. That seems to be more likely to occur in 2020 than it has at any time since Reagan. Like it or not, Bush I, Clinton, Bush II, and Obama all followed similar economic policies.

Trump has disrupted much of them, returning to a vigorous trickle-down policy, aggressive deregulation and the imposition of unilateral tariffs.

Max Weber, in his 1919 essay on “Politics as a Vocation”, made a distinction between politicians who live by the “ethics of responsibility” and those who follow the “ethics of conviction”. The ethic of responsibility is all about pragmatism; doing the right thing in order to keep the show on the road. But the ethic of conviction is all about moral (ideological) purity, about following the playbook despite the impacts.

An example is the Kansas Experiment, where Sam Brownback, following right-wing convictions, cut taxes to produce a “shot of adrenaline into the heart of the Kansas economy.” Economic growth was below average, state revenues crashed, and debt blew up. But, still a believer, Brownback vetoed the effort to repeal of his laws.

You don’t need more from Wrongo to paint the picture. We’re in a time of the ethics of conviction.

Let’s take a look at two recent articles about the economy. First, from the Economist, which is telegraphing the possibility of a US recession:

“Residential investment has been shrinking since the beginning of 2018. Employment in the housing sector has fallen since March….The Fed reduced its main interest rate in July and could cut again in September. If buyers respond quickly it could give builders and the economy a lift.”

But housing is not the only warning sign. The Economist points to this chart, showing the change in payrolls in the 2nd Quarter of 2019:

It’s clear that much of America is doing quite well. It is also clear that most of the 2020 battle ground states are not. Indiana lost over 100,000 manufacturing jobs in the last downturn, almost 4% of statewide employment. It is among a growing number of states experiencing falling employment: a list which also includes Ohio, Pennsylvania and Michigan.

In 2016, those last three states all delivered their electoral-college votes to Trump, and were decisive in his electoral victory. Trump’s trade war may still play well in these states, but if the decline in payrolls continues, it suggests a real opening for Democrats, assuming they are willing to hammer on pocketbook issues.

Second, the Wall Street Journal had an article about winners and losers in the 10 years since the Great Recession. It isn’t a secret that those left behind are in the bottom half of the economic strata, and there is little being done to help them:

“The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.”

We also call wealth “net worth”. It is the value of assets such as houses, savings and stocks minus debt like mortgages and credit-card balances. In the US, wealth inequality has grown faster than income inequality in the past decade, making the current wealth gap the widest in the postwar period. Here is a devastating chart from the WSJ showing the net worth of the bottom 50% of Americans:

There’s a big difference between the 1% and the bottom 50%: More than 85% of the assets of the wealthiest 1% are in financial assets such as stocks and bonds. By contrast, more than half of all assets owned by the bottom 50% comes from real estate, such as the family home.

Economic and regulatory trends over the past decade have not only favored stock investments over housing, but they have also made it harder for the less affluent to even buy a home. The share of families in the bottom 50% who own a home has fallen to 37% in 2016, (the latest year for which data are available), from 43% in 2007. OTOH, homeownership among the overall American population is higher since 2016.

Weber’s ethics of conviction have driven our politics since well before the 2008 recession. We know what it caused: inequality, demonstrated by lower wages for the 90%, and a devastating decline in net worth for the bottom 50%.

Can we turn the car around? Can we elect politicians who will follow Weber’s ethics of responsibility at the local, state, federal and presidential levels in 2020?

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Tuesday Wake Up Call – September 3, 2019

The Daily Escape:

Clouds and light, Zion NP, Utah – 2019 photo by walkingaswind

It’s fair to ask, “What happened to the Wrongologist?” He’s taken a long break from posting, in part due to fatigue brought on by our toxic political environment. But beyond that, Wrongo has (at least temporarily) despaired of seeing a path forward to meaningful political change.

Here’s a few relatively connected changes to ponder on Labor Day.

We’re in the midst of a big demographic change. Demo Memo reports that Non-Hispanic Whites (that’s white people to us non-demographers) will account for just 47% percent of the nation’s 2019 public school students, according to the National Center for Education Statistics. That means the majority of students (53%) in grades K through 12 will be Hispanic, Black, Asian, or another minority.

That’s a big drop since 2000, when 61% of public school students were non-Hispanic White. Their share fell below 50% in 2014. The non-Hispanic White share of public school students will continue to fall. In 2027, non-Hispanic Whites will account for 45% of students, according to projections by the National Center for Education Statistics.

It’s not a coincidence that nearly 32% of Americans aged 18 or older can speak a language other than English. According to the 2018 General Social Survey, this figure is up from 28% a decade ago. Asians and Hispanics are most likely to say they can speak a language other than English, 83% and 69%, respectively. By generation, the youngest Americans are most likely to be able to speak a language other than English, with the iGeneration at 43%, Millennials at 39%, and GenX’ers at 33%.

Times they are a-changing.

Changes on the jobs front have already occured. Here is chart from Visual Capitalist showing the largest non-government employer in all 50 states. Sadly, even in this time of economic progress, Walmart is the largest employer in 21 states:

In many states, either the state or federal government is the top employer. California employs 250,000 federal workers. New York State is unique, since NYC’s municipal workforce is the state’s top employer. And then, there is the US Department of Defense: Eight states have more active military personnel than any single private employer.

Universities and hospitals are top employers in nearly half of the states.

But Walmart is the biggest private employer, with 1.5 million workers. They employ about 1% of private sector workforce in the US. Amazon is a distant second with more than 500,000 employees.

How are the facts about majority/minority schools and Walmart as  our largest employer linked? According to Walmart’s 2019 diversity report, 44% of Walmart employees are people of color. This means that after graduation, Walmart is a likely workplace for many of them. People of color account for 61% of Amazon employees.

And the average wage for a full-time Walmart employee in the US is $14.26. Recent full-time pay in a New Jersey Amazon warehouse was $13.85. Both sound fine until you realize that these are average pay rates for full-time workers. Many earn far less. And few actually are full-time workers, most are part-time.

Are these good jobs at good wages? They are not.

Our schools are getting more diverse, and the jobs we hold now are increasingly fragile. What’s more, for many Americans, one job doesn’t provide a living wage. As the NYT reported in a Labor Day opinion piece by Binyamin Appelbaum and Damon Winter:

“More than eight million people — roughly 5 percent of all workers — held more than one job at a time in July, according to the most recent federal data.”

Dignity. Shouldn’t America strive to make working at one job pay enough to provide for a person’s family? We tout the low unemployment rate, and the statistics that show millions of available and unfilled jobs. But, except for a few jobs involving high barriers to entry, “worker shortage” is a euphemism for “this job doesn’t pay well enough, or have good enough conditions to attract enough workers.”

There’s no worker shortage in America, there’s a pay and good working conditions shortage. Work doesn’t have to be absorbing, but it should be free of fear, and it should be worthy of one’s talents.

It’s baffling to Wrongo that supposedly smart politicians have facilitated a system that has robbed wealth from the bottom 90% of Americans and funneled it to the top 1%, largely through holding down workers’ wages, when our economy is driven by consumer spending.

All of us are wage slaves to a degree, we all sell our time and talent for money. Our schools are the basis for building talent. That, plus job experience, is what the average American offers to sell to employers.

So this is mostly a post about future Labor Days.

Time to wake up America! Without profound changes to how we educate our kids, and how we reward capitalists and capitalism, our country of tomorrow will bear little resemblance to the nation of today.

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Saturday Soother – August 3, 2019

The Daily Escape:

Wotans Throne, North Rim, Grand Canyon NP, AZ – photo by phantomcloud.

The WSJ has an important story on how people with what seems like pretty good household incomes, are getting more and more indebted trying to keep up a middle class lifestyle:

“The American middle class is falling deeper into debt to maintain a middle-class lifestyle.

Cars, college, houses and medical care have become steadily more costly, but incomes have been largely stagnant for two decades, despite a recent uptick. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.

Consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation. Mortgage debt slid after the financial crisis a decade ago but is rebounding.

Student debt totaled about $1.5 trillion last year, exceeding all other forms of consumer debt except mortgages.

Auto debt is up nearly 40% adjusting for inflation in the last decade to $1.3 trillion. And the average loan for new cars is up an inflation-adjusted 11% in a decade, to $32,187, according to a Wall Street Journal analysis of data from credit-reporting firm Experian.”

The Journal gives a generally sympathetic portrayal, provided you don’t go deeply into their comments section, where readers spout platitudes about Millennial’s lack of fiscal responsibility. Here’s a chart from the WSJ using some recent work by Georgetown bankruptcy law professor Adam Levitin showing how much certain costs have risen relative to wages:

More from the WSJ:

“Median household income in the U.S. was $61,372 at the end of 2017, according to the Census Bureau. When inflation is taken into account that is just above the 1999 level.

Average housing prices, however, swelled 290% over those three decades in inflation-adjusted terms, according to an analysis by Adam Levitin, a Georgetown Law professor who studies bankruptcy, financial regulation and consumer finance.

Average tuition at public four-year colleges went up 311%, adjusted for inflation, by his calculation. And average per capita personal health-care expenditures rose about 51% in real terms over a slightly shorter period, 1990 to 2017.”

Of course, in Wrongo’s youth, few young people were carrying large amounts of student debt. And if they went to coastal cities to build their careers, the cost premium over living in a city in the heartland wasn’t as high as it is now (except for San Francisco and New York, which have always been very expensive). Also, it isn’t just tuition that has gone up. All the other college costs, housing, meals, books, and fees, have also gone up more than 300% in the past 30 years.

It is notable that college costs have far outpaced the ability of those in the middle class to afford them. That is why student loan debt has become so high: working your way through college is no longer as realistic as it once was.

Turning to housing, the WSJ quotes Domonic Purviance of the Federal Reserve Bank of Atlanta, who says that people earning the median income can no longer afford the median-priced new home, which cost $323,000 last year, and barely have the means to buy the median existing home, which is now about $278,000.

Failure of wages to keep up with costs is a huge problem, and it has to be emphasized that this is not some inevitable outcome of our so-called “free markets” – it is driven by neo-liberal policy.

A few of the Democratic candidates are addressing the health and education cost burdens now adding to the debt load of all Americans. But we need more discussion that leads us to better policy.

With so much wrong in the world, we surely need to take a step back, and de-stress. To help with that, here’s your Saturday Soother. Let’s start by brewing up a large mug of Finca Las Nieves Green-Tip Geisha coffee ($35.00/8 oz.). This coffee is grown and roasted in Mexico. Located at an elevation of 4,000 feet, Finca Las Nieves is a 1,000-acre coffee farm located in Oaxaca State. It is completely off the grid — both solar- and hydro-powered. In addition to growing, harvesting, processing and roasting coffee, the farm also offers vacation bungalows for rent on the property.

Now, settle into a comfy chair and listen to Bach’s unaccompanied Cello Suite No. 1 in G Major, movements 1-3 of 6, by Yo Yo Ma. The video uses a painting by Hudson River School painter, Thomas Cole. It is called “The Oxbow”, located on the Connecticut River in Massachusetts near Northampton, MA. Here is Yo Yo Ma:

Those who read the Wrongologist in email can view and listen to the video here.

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Can Democrats Be Republican Lite in 2020 and Win?

The Daily Escape:

Bowman Lake, Glacier NP – June 2019 photo by TheChariot77

We’re facing multiple crises over the next few years that require big policy fixes. Climate change is an existential threat, and the consequences of inaction far outweigh the risk of doing too much, too soon in trying to solve it. Education, healthcare, and housing costs are growing in unsustainable ways, and threaten to leave large swathes of Americans behind. The under-investment in our infrastructure is approaching a point of no return. The toxic combo of immigration, income inequality and political division could lead us into a second Civil War.

When we look at both Party’s candidates for 2020, do any of them have ideas that can solve these problems? Trump offers nothing to address them. A few of the Democrats running for the nomination have big ideas, and a few newbies in Congress have big ideas of their own.

The question is, will the Establishment Democrats prevent the candidates from offering big ideas to American voters?

In a prescient article in the WaPo, “Haunted by the Reagan era”, Ryan Grim made the point that older Democrats, like Pelosi, Schumer and Biden were scarred by past defeats, and subsequently, have attempted to placate their Republican opposition. From Grim:

“It’s hard to overstate how traumatizing that 1980 landslide was for Democrats. It came just two years after the rise of the New Right, the Class of ’78 led by firebrands like Newt Gingrich, and it felt like the country was repudiating everything the Democrats stood for. The party that had saved the world from the Nazis, built the modern welfare state, gone to the moon and overseen the longest stretch of economic prosperity in human history was routed by a C-list actor. Reagan won 44 states….”

It also happened in 1972, when Nixon swamped the liberal Democrat, George McGovern, 49 states to one. More from Grim: (emphasis by Wrongo)

“When these leaders plead for their party to stay in the middle, they’re crouching into the defensive posture they’ve been used to since November 1980, afraid that if they come across as harebrained liberals, voters will turn them out again.”

Maybe it’s political PTSD. For younger politicians like Rep. Alexandria Ocasio-Cortez (D-NY), this is a strategic error. For the young Democrats, Republicans shouldn’t be feared, they should be beaten.

But, Joe Biden is leading the polls for the Democratic nomination. He, like the other Establishment Dems, assume the voters won’t agree with them on fundamental change. They think that Democrats only get elected by avoiding riling up the conservative silent majority, or, at least, the majority of those who actually turn out to vote. From David Atkins:

“They hew to the late 20th century perspective that the wisest course lies in not making change too quickly, or giving any political party the power to make sweeping changes. This status-quo philosophy is part of why America hasn’t made any major changes to its economic or political structures since enacting Medicare in the 1960s.”

They believe this, no matter how much polling shows that voters increasingly reject conservative precepts. More from Atkins:

“Voters swept Barack Obama and the Democrats into unitary control of government in 2008, and got for their trouble a too-small stimulus and a relatively minor adjustment to the healthcare system. Voters… swept Donald Trump and Republicans into unitary control of government in 2016, and for their trouble got a tax cut for the wealthiest Americans….And when neither party has total control of government, practically nothing happens at all.”

So, should the Democrats run to the center in 2020? Hillary lost doing precisely that in 2016, but the Dems took back the House in 2018 mostly by winning centrist districts, including many that had voted for Trump in 2016. The Establishment Democrats want to hedge their bets, protecting a status quo that, in the medium-term, may prove very dangerous to the country.

The Dems won 2018 in part by promising to reign in Trump. Once in control, Pelosi took all substantive actions off the table, opting instead for a series of small, politically-irrelevant investigatory gestures.

Those who voted for them have to wonder: If this all that they’re going to do, why give them the power?

Sanders and Warren are old enough to be Establishment Dems, but they are true progressives. Neither Warren, nor Sanders is a once-in-a-generation superstar like Barack Obama. Assuming none of the current pack of nominees are like him, the question is whether the Dems on the extreme left, or the center-left, are more likely to turn out enough voters to carry Wisconsin, Michigan, Pennsylvania and possibly, Florida.

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Monday Wake Up Call – July 1, 2019

The Daily Escape:

East Inlet Pond, Pittsburgh NH – photo by Wes Lavin. The East Inlet area has one of the few remaining virgin stands of forest in the east.

How did Boeing, a company known for meticulous design and manufacturing, screw up the 737 Max so badly? Bloomberg is reporting that Boeing outsourced software development for some of the 737 Max’s software to Indian companies. There are concerns that decision may have contributed to Boeing’s two deadly crashes.

Bloomberg says that starting in 2010, Boeing began relying on Indian software engineers making as little as $9 an hour in their design program. The software engineers were supplied by the Indian software developer HCL Technologies, which now has annual sales of $8.6 billion. The coders from HCL designed to specifications set by Boeing but, according to Mark Rabin, a former Boeing software engineer:

“It was controversial because it was far less efficient than Boeing engineers just writing the code.”

It turns out that the HCL engineers were brought on at a point when Boeing was laying off its own experienced software developers. In posts on social media, an HCL engineer who helped develop and test the Max’s flight-display software, summarized his duties:

“Provided quick workaround to resolve production issue which resulted in not delaying flight test of 737-Max (delay in each flight test will cost very big amount for Boeing).”

This may be resume inflation. Boeing insists that HCL had nothing to do with the Max’s Maneuvering Characteristics Augmentation System (MCAS) software. HCL said that it:

“…has a strong and long-standing business relationship with The Boeing Company, and we take pride in the work we do for all our customers. However, HCL does not comment on specific work we do for our customers. HCL is not associated with any ongoing issues with 737 Max”.

It isn’t unusual for US companies to use outsourced talent. Prior to his dynamic blogging career, Wrongo was CEO of an outsourcing firm. Our clients were the US government, and several big tech and office product companies, including Dell, Microsoft, and Xerox.

But managing outsourcing is tricky, both for the company moving the work out-of-house, as well as for the outsourcer. Unless the parties develop detailed plans, procedures, and follow strict quality control, even top people can produce work that fails to meet design standards.

The typical jetliner has millions of lines of code. From Rick Ludtke, a former Boeing flight controls engineer:

“Boeing was doing all kinds of things, everything you can imagine, to reduce cost, including moving work from Puget Sound, because we’d become very expensive here….All that’s very understandable if you think of it from a business perspective.”

More profits over people.

In 2010, HCL and Boeing opened a “Center of Excellence” in Chennai, saying the companies would partner to create software used in flight testing. This is typical for big companies. Boeing also has a design center in Moscow. From Cynthia Cole a former Boeing engineer who headed the Engineer’s Union from 2006-2010: (emphasis by Wrongo)

“At a meeting with a chief 787 engineer in 2008, one staffer complained about sending drawings back to a team in Russia 18 times before they understood that the smoke detectors needed to be connected to the electrical system…”

A big reason for offshoring is price. Engineers in India make about $9 — $10/hour, compared with $35 to $40 for Indians in the US on an H1B visa, and higher for a US engineer. Anyone who understands offshoring knows that the cost of rework needs to be added to the apparent hourly cost, and in some cases, that can push the real price closer to $80/hour.

For the 787 Dreamliner, much of Boeing’s work was outsourced. It is well-known that the 787 entered service three years late, and billions of dollars over budget, in 2011. That was due in part to confusion caused by their outsourcing strategy.

Was another globalist lesson learned by Boeing with the 787? Not really, if the 737 Max troubles are any indication.

So this cheap labor story is another black eye for Boeing. It goes along with the Justice Department’s criminal probe, and the FAA’s continuing concern about the Max software. Boeing also has disclosed that the company didn’t inform regulators of the MCAS problems when they first learned about them, because engineers had determined it wasn’t a safety issue.

This is more of the crapification of America’s best companies as they chase lower costs. This time, people died.

Wake up Boeing! The high-value, high-risk elements in your product must be sourced at home.

If America had a real Justice Department, Boeing’s management would be in jail.

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Monday Wake Up Call – June 24, 2019

The Daily Escape:

View from Angels Landing summit, Zion NP Utah – 2019 photo by SurrealShock. 86,000 people visited Angels Landing over the four-day Memorial Day weekend in 2018.

On Sunday, the NYT reported: (emphasis by Wrongo)

“In the last decade, private land in the United States has become increasingly concentrated in the hands of a few. Today, just 100 families own about 42 million acres across the country, a 65,000-square-mile expanse, according to the Land Report, a magazine that tracks large purchases. Researchers at the magazine have found that the amount of land owned by those 100 families has jumped 50 percent since 2007.”

The West is a patchwork of public and private lands. Land ownership in the West has always been concentrated in the hands of the federal government, which owns about 50%. Now we learn that the rest of the West is quickly moving into the hands of a very few people.

The large purchases by these new private landholders come as the region is experiencing the fastest population growth in the country. That drives up housing prices and the cost of living. Some locals are fearful of losing both their culture and economic stability.

Rocky Barker, a retired columnist for The Idaho Statesman, has said this is a clash between two American dreams, pitting the nation’s respect for private property rights against the notion of beauty-rich publicly-owned lands set aside for the enjoyment of all.

In the West, there is an evolution of an economy based in minerals extraction, to one based on recreation; from a working class culture to a more moneyed one. The NYT article focuses on one family, the Wilks brothers, Dan and Farris, who made their money ($3.5 billion) in fracking. They sold out, and bought a vast stretch of mountainous land in southwest Idaho.

The Wilks brothers see what they are doing as a duty. God had given them much, and in return, “we feel that we have a responsibility to the land.”

The Wilkses now own 700,000 acres across several states, and have become a symbol of the out-of-touch owner. In Idaho, they have closed trails, and hired armed guards to patrol their land, blocking or stymieing access not just to their property, but also to some publicly owned areas. They also hired a lobbyist to push for a law that would stiffen penalties for trespass, and the bill passed.

This has made locals angry, as they have hiked and hunted on these lands for generations. Some emailed the Wilkses, asking permission to cross their property. They were surprised to receive a response suggesting they first visit PragerU, a right-wing website that was financed by the Wilkses and share their opinions of its content.

This is an example of a test for land use. Should you have to tell landowners your political views before you get to use their land?

Welcome to the future. Concentration of land ownership is a natural consequence of our free market capitalism. Our capitalist system isn’t designed to prevent concentration of ownership, whether it be of corporations or land.

That requires politicians who are not beholden to corporations and capitalists.

Our ancestors left Europe because by the 1600s, much of the land had already been bought up and was either inaccessible, or available in small lots for rent. America has been in the process of being divided up in the same way since the 1700s.

We talk about wealth inequality, and this story shows again that it is much more than numbers on a ledger. It is the power to own vast chunks of America, to decide how that land will be used, and to charge for that usage if they desire.

Battles over both private and public land have been a defining part of the West since the 1800s. For years, fights have played out between private individuals and the federal government.

OTOH, Americans in the West have made private ownership of wilderness a sacrament. They even contend that private use of public lands should be a right. Now, when the results of concentrated private land ownership become clear, when suddenly, a river or a mountain range they’ve enjoyed using for decades has a fence around it, their bellyaching begins.

But when the Wilkses, who made their money in fracking talk about how they feel they have a responsibility to the land, that has to be seen as hypocrisy.

The people in the West should Wake Up and give thanks for every inch of every national park. They should willingly pay additional taxes to keep our national parks in prime condition.

And they should finally see the wisdom in higher income taxes on corporate profits, and in Elizabeth Warren’s taxes on individuals with greater than $50 million in assets .

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