When Robots Take All of Our Jobs, Remember the Luddites-John Mauldin May 3, 2017
If you don’t think the transformation we’re embarked upon is a profound one, consider this: Within two decades, half the jobs in this country may be performed by robots. What then of our unemployment rate and social safety net? Opinion is divided: Will the next technological wave further skew the wealth distribution toward the uber-rich, or will it ultimately create more entrepreneurial and job opportunities than it destroys?
There is an interesting historical precedent for our situation, an era during which the technological firmament shifted just as abruptly as it is here and now. In the United Kingdom in the year 1800, the textile industry dominated economic life, particularly in Northern England and Scotland. Cotton-spinners, weavers (mostly of stockings), and croppers (who trimmed large sheets of woven wool) worked from home, were well compensated, and enjoyed ample leisure time.
Ten years later, that had all changed. Clive Thompson, the author of today’s Outside the Box, tells us what happened:
(I)n the first decade of the 1800s, the textile economy went into a tailspin. A decade of war with Napoleon had halted trade and driven up the cost of food and everyday goods. Fashions changed, too: Men began wearing “trowsers,” so the demand for stockings plummeted. The merchant class—the overlords who paid hosiers and croppers and weavers for the work—began looking for ways to shrink their costs.
That meant reducing wages—and bringing in more technology to improve efficiency. A new form of shearer and “gig mill” let one person crop wool much more quickly. An innovative, “wide” stocking frame allowed weavers to produce stockings six times faster than before: Instead of weaving the entire stocking around, they’d produce a big sheet of hosiery and cut it up into several stockings. “Cut-ups” were shoddy and fell apart quickly, and could be made by untrained workers who hadn’t done apprenticeships, but the merchants didn’t care. They also began to build huge factories where coal-burning engines would propel dozens of automated cotton-weaving machines….
The workers were livid. Factory work was miserable, with brutal 14-hour days that left workers – as one doctor noted – “stunted, enfeebled, and depraved.”… Poverty rose as wages plummeted.
Enter the notorious Luddites. Angry workers began to fight back, destroying the hated wide stocking frames and cotton-spinning machinery and even killing factory owners. Soon they were breaking at least 175 machines per month, and within months they had destroyed some 800, worth £25,000—the equivalent of nearly $2 million today.
As we know, the owners retaliated, the English government intervened decisively, and the Luddite rebellion was crushed. However, says Thompson,
At heart, the fight was not really about technology. The Luddites were happy to use machinery – indeed, weavers had used smaller frames for decades. What galled them was the new logic of industrial capitalism, where the productivity gains from new technology enriched only the machines’ owners and weren’t shared with the workers.
The owners had taken to heart Adam Smith’s The Wealth of Nations, published a few decades earlier, in which Smith makes the case for a laissez-faire, free-market economy. In the ensuing centuries we have seen a seesaw battle between labor and capital, and it certainly appears that capital now has the upper hand; but clearly, the Industrial Revolution did lift all boats: It is inconceivable that we could support our present global population without our machines.
But will the Information Revolution that gave us computers, the internet, and social media – and the AI Revolution that is about to give us self-driving taxis and trucks and robot baristas – continue to lift our lower and middle classes, or further disempower and impoverish them? more
So Bitcoin has traded at all time high of $1900. That was Golds all time high years ago ($1900/oz) Every day gets more interesting and confusing at the same time. Well at least Gold doesn't get randsome ware, computer virus or go poof! over the interweb.
World Bank warns of China debt risk from backdoor local borrowing Localities use off-budget borrowing to fund infrastructure despite falling returns MAY 6, 2017 by: Tom Mitchell in Beijing and Gabriel Wildau in Shanghai
The World Bank has warned that Chinese local governments remain addicted to off-budget borrowing, despite Beijing’s efforts to impose fiscal discipline on localities and curb ballooning debt.
Runaway growth of local government debt is widely seen as a huge risk for China’s economy and financial system.
Provinces, cities and counties borrowed heavily to spend on infrastructure to keep economic growth humming after the 2008 financial crisis. But the practice has continued and economists warn that returns on new investment are falling and white elephants are common. Many projects do not produce enough cash flow to service their debt.
In 2014 China moved to eliminate borrowing through special-purpose vehicles, which local officials had used to circumvent a legal ban on direct borrowing. Under the moniker of “close the back door, open the front door”, China’s parliament ended the legal ban, enabling localities to borrow within clear limits set by Beijing.
Meanwhile, local government finance vehicles were ordered to cease disguised fiscal borrowing. To deal with legacy debt, Rmb8tn ($1.2tn) in outstanding LGFV borrowing was converted into on-budget provincial debt through a bond swap.
But growth of LGFV debt has actually accelerated since 2015, the World Bank warned in a confidential March presentation obtained by the Financial Times. Despite the swap programme, “LGFVs continued to borrow and increase their liabilities at a very rapid pace” in 2015-16, the bank’s lead China economist John Litwack and analyst Luan Zhao said.
Local governments and their LGFVs account for “the vast majority of public expenditures and public investment”, they noted, adding that “government and LGFV finances [are] intertwined in complicated ways, making separation difficult in practice”.
Growth of LGFV liabilities accelerated from 22 per cent in 2014 to 25 per cent in 2015 and stayed high at 22 per cent in the first half of 2016, the authors found.
The presentation noted that Beijing’s effort to stop the use of LGFVs as quasi-fiscal entities may have unintentionally encouraged them to increase borrowing. Local fiscal authorities are now forbidden from officially monitoring LGFV finances, since to do so would imply that the government stands behind their debt.
“Instructions to no longer even monitor finances of LGFVs can give a dangerous impression of ‘free money’,” the presentation warned.
The presentation accompanied a report on World Bank loans to the large inland province of Hunan and the megacity of Chongqing. The loans involved consultation and monitoring of local finances in those areas.
Two people briefed on the World Bank’s findings said the research on Hunan and Chongqing was unusual, as most local officials were not willing to open their books to international officials — or even to their superiors. They added that efforts to expand the Hunan provincial-level research to include individual counties had been rebuffed.
“Provinces have very limited information about the off-balance sheet finances of local governments,” the World Bank said in its March presentation.
In late April, China’s finance ministry issued a new order instructing local governments to resume monitoring the debt of LGFVs under their control
Instructions to no longer even monitor finances of LGFVs can give a dangerous impression of ‘free money’ World Bank presentation Despite the research findings that local debt growth remains high, at least some localities are moving to address the problem. In an unprecedented commitment, Hunan pledged to freeze public investment growth at 3 per cent through 2025, down from 16 per cent in 2015.
“Fiscal sustainability in Hunan will require phasing out public investment-driven stimulus policies in the near future,” the World Bank warned in a programme document in December.
World Bank China country director Bert Hofman said: “We have been working very productively with Hunan province and Chongqing municipality on developing the processes and rules needed to maintain fiscal sustainability.”
In a statement, Hunan said it had “drawn abundantly from the World Bank’s ripe experience in debt management”.
HUNAN PUBLIC INVESTMENT AND LIABILITIES 2014* 2015* 2016** 2017 2018 2019 2020 2021 2022 2023 2024 2025 Public investment (Rmb bn) 299.9 348.9 359.4 370.2 381.3 392.7 404.5 416.6 429.1 442.0 455.3 468.9 Year-on-year increase (%) - 16.4 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Public liabilities (% of GDP) 44.4 48.1 52.1 55.4 58.7 60.1 61.4 62.3 62.8 63.1 63.1 62.9 * Actual ** Budget 2017 - 25 figures projected Source: World Bank Follow Tom Mitchell and Gabriel Wildau on Twitter: @tmitchpk; @gabewildau-ft
Mario Draghi riled by Dutch MPs in public grilling
Usually unruffled central banker faces hostile questions in parliament by: Claire Jones in Frankfurt and Mehreen Khan in London
Mario Draghi faced a rare public grilling on Wednesday that left the president of the European Central Bank rattled as he defended some of his unpopular policies to Dutch MPs.
The usually unruffled central banker was riled by hostile questions about the euro and the ECB’s measures to revive the eurozone economy.
Confronted with the possibility of the Netherlands quitting Europe’s monetary union by Eurosceptic MP Thierry Baudet, an angry Mr Draghi said: “The euro is irrevocable. This is the treaty. I will not speculate on something that has no basis.”
Highlighting the ECB’s role in the eurozone’s economic recovery, he said policies had helped create 4.5m jobs. “That’s the reality, the rest is speculation.”
Mr Draghi was invited to The Hague to discuss the eurozone economy, which is edging towards recovery after years of fragility following the financial crisis. He told MPs that the ECB was helping to create jobs and generate growth.
But the Dutch political establishment has been fiercely critical of the ECB’s stimulus measures, which have seen the central bank buy more than €1.8tn of assets over the past two years and cut interest rates to record lows.
Mr Draghi faced accusations that he had raided Dutch pensioners’ wealth through ECB policies: many Dutch share the German view of blaming the central bank’s measures for eroding their savings.
In two hours of sometimes sharp exchanges, Mr Draghi also faced questions about the transparency of the bank’s meetings and whether the ECB’s stimulus measures broke EU treaties.
Asked what would happen if a eurozone member needed to restructure its debt, he said: “We don’t want to speculate on the probability of things that have no chance of happening. Why are you asking me that?”
At one point following the ringing of bells in the Tweede Kamer, the lower house of the Dutch parliament, one MP called out that the sound was the “end of your [QE] policies”.
MPs finished the session with a gift of a solar-powered tulip for Mr Draghi, to remind him of the country’s famous Tulip Mania asset price bubble and financial crisis in the mid-17th century.
“We want you to look at this tulip before your meetings,” said Pieter Duisenberg, the head of the finance committee — and son of Wim Duisenberg, the ECB’s first president.-ft