It seems as if there is a new theory every day about what has caused the great economic divide between the US middle class and the one percent.  Many people want to blame a specific group of people for the long term decline in relative living standards and the income disparity between the middle class and the one percent, which includes many senior corporate executives, many senior people in the financial industry and those fortunate individuals that are winning the game of life through their unique skills or ideas.  All of the random thoughts on this issue have obscured the fundamental reasons why this development has occurred and why it will continue indefinitely into future without some fundamental changes in economic and political philosophy in the US.  There are three critical factors that are driving this trend: globalization, technology and the actions of the Federal Government and Federal Reserve. 

After World War II the US was the only industrial country left intact.  The US was in a position of maximum economic power.  For 50 years (1945 to about 1995) the rest of the world slowly began to erode US economic power.  The US dissipated significant economic power through its large defense expenditures over this period while other nations invested in their economies.  In the mid 1990s the US agreed to two major international trade agreements, NAFTA (North America) and the WTO ( the world).  These agreements gave US market access to hundreds of millions of unskilled and semiskilled low wage workers located around the world.  The US government willingly agreed to transfer some of our nations wealth to the rest of the world over time through free trade agreements.  Opponents of these agreements, advocated by President Clinton's administration, warned of the long term impact of fully opening US markets to very low wage workers.  US companies grew larger and larger in order to compete was widely as possible.  Bigger companies measn higher executive pay.  US companies implemented global supply chain management systems in-order to compete with new market entrants from around the world.  One of the direct results of these trade agreements was that unskilled and semiskilled Americans were forced to compete directly or indirectly against their foreign peers who were willing to work for a fraction of their wages.  This process continues today.  Between illegal immigrants and foreign sourcing of all kinds of products and services there is continual wage pressure on all persons at this skill level in the United States. 

The second element of the income disparity trend has been caused by technology.  One must consider all aspects of technology including communications, transport, and information technology.  The communications infrastructure of the world has vastly changed in recent decades.  A person can send information of any type in real time to any location in the world at any time of day using a combination of fiber optics (wire-line), terrestrial wireless and satellite communication.  No person or company is off the grid unless they want to be.  This includes ships at sea.  A supplier on the other side of the planet is as easy to contact as a business down the street from a communications infrastructure perspective.  The massive investment in communications infrastructure throughout the world has eliminated communications as a barrier to trade. 

We must also consider the advancements of the transport industry in recent decades.  Massive new ships for transporting all kinds of materials and finished goods have been constructed.  New or expanded ports with high tech freight handling equipment have been constructed.  Inter-modal containers that allow ships, trains and trucks to seamlessly haul goods from factory to final distribution center have been developed.  Railroads have been expanded and made more efficient through investments in technology.  Every truck on the road and its cargo can be easily tracked at all times using wireless and satellite technology.  Freighter aircraft are used to transport high value goods anywhere on the planet.  The global transportation system is far more productive and lower cost (per unit being transported relative to its production cost) than ever before.  Distance from producer to consumer is no longer a major barrier to entry for a competitor. 

Information technology includes the Internet, PCs, servers, applications software, smart phones and all the other hardware and software that makes up today's business support infrastructure.  This equipment and software is relatively inexpensive and can be located anywhere on earth.  All suppliers of goods and services have access to the most advanced business information technology and can use it to make their business more productive from anywhere on the planet.  Information technology is not a barrier to entry for many types of businesses.  If one is building a business from scratch using the latest technology sometimes the new entrant can obtain competitive advantage over an established business that is using technology that is a generation or two older.

I am sure most people have heard the term "productivity".  It is a measure of efficiency in delivering goods and services.  One of the goals of businesses is to be more productive every year.  A simple way of looking at this objective is to use less labor or labor expense per unit of production.  In other words - use technology or lower cost labor to get the task done.  This is what all of the areas of technology are attempting to accomplish.  This is not helpful to the middle class from an income perspective.  If executives are successful in making their businesses more productive, and profitable, they are financially rewarded.

The actions of the US Government and the Federal Reserve have made significant contributions to the escalating divide between the middle class and the one percent.  I could spend days writing about their role but I want to keep this blog succinct.  Every time the US government borrows a dollar of new debt or rolls over existing debt somebody in the financial industry makes a profit.  Every time a government agency issues more debt, somebody in the financial industry makes a profit.  The more debt the government issues or guarantees, the more profit the financial industry makes.  This has a compounding impact when you include trading of debt and derivatives created around the debt.  The Federal Reserve is in business to make sure that the financial industry makes a profit.  The Federal Reserve creates interest rate policies that result in the transfer of wealth from individuals to the financial industry.  The actions of the Federal Reserve and the government during the time of the 2007 to 2009 financial crisis demonstrated to everyone that their first priority was to save the financial industry at the expense of the taxpayers.  Why does a taxpayer get virtually no interest on a savings account when the Federal Reserve pays interest to banks for their reserves deposited with them?  The interactions between the financial industry, the Federal Reserve and the US government is designed to protect and grow the profit making capability of the financial industry as the first priority.  Many events have occurred in recent years that I could write about on this point.  The bottom line is that the average person in the US has no idea how the government, the Federal Reserve and the financial industry work together to manage the financial system.  There was a reason our founding fathers didn't establish a central bank in the constitution.  It was not in the best interest of the citizens.  Have we learned our lesson yet? 

It is my belief that these three areas, globalization, the many facets of technology and the actions of the US Government and Federal Reserve are the primary drivers of the great economic divide between the one percent and the middle class.  The divide has grown over decades and is embedded in the global economic system and US financial system.  If an individual can't or is unable or unwilling to compete in the global labor marketplace, that individual will be left behind.  Skills and knowledge are everything in the world today.  Unskilled and semiskilled labor are procured at the lowest available cost and can be replaced quickly if needed.  Our political leaders created this system.  The pressure to create globalization was a natural outcome of the recovery of the world economy after the destruction caused by World War II, global population growth and changes in political and economic policies in many countries.  It will take a massive change in the economic policies of our political leaders to result in any actions that will fundamentally impact the great economic divide. 

TPM 

 

The title of this blog, What is the History of the Human Race?, is a perfectly rational question that many people attempt to answer in many different ways.  Some people relay on religious faith, others rely on the "experts" and a few of us attempt to find out the answer ourselves by investigating many different possibilities including listening to people with a variety of opinions.  I include myself in the third category. 

As part of my personal investigation I read a book first published in 1993 and revised a couple of times in the 1990s.  The book is Forbidden Archeology - The Hidden History of the Human Race by Michael A Cremo and Richard L. Thompson.  The book is over 800 pages long, including appendices.  Much of the book is incredible detail about items found by paleoanthropologists and others over the past two hundred years in a variety of locations around the world.  Normally, I try to read everything in a book, however, I have to admit that I skimmed and skipped many pages in this one.  The level of detailed research by the authors is incredible and it resulted in a very, very long book.  So what did I get out of the book? 

Charles Darwin's theory of evolution has been fully supported by the scientific establishment for almost 150 years. It has become part of our educational system.  Many important people in the scientific establishment have had a vested interest in supporting Darwin's theory for a number of generations.  Forbidden Archeology clearly illustrates that there are many holes in Darwin's theory.  There are many, many unexplained pieces of evidence that have been gathered from all over the world that don't fit Darwin's theory.  

While the book has incredible details on stone age tools and ancient fossils it also includes information on some more entertaining topics, like Living Ape-Men.  The stories are amazing.  The research goes back over a century.  Could all of these stories be lies or misinterpretations?  There have been many new finds that have been added to data base during the past 20 years, not described in the book, that have added to the mystery of how all of the finds that have been recorded fit together. 

The scientific community has accumulated a very large number of data points related to a massive puzzle and doesn't fully understand how to put the pieces together.  This is understandable.  Darwin clearly didn't have much data when he formulated his theory, therefore, his theory doesn't deserve much scientific support based on the all the knowledge available to us today.  The bottom line is that we really don't know the answer to my question. 

Many people look to religion for answers.  They are entitled to their opinion.  Unfortunately, there is too much data from many sources to support the limited view of history by creationists.  There is no material evidence that supports the views of the "ancient aliens seeded the earth with humans" enthusiasts. 

We have a lot of information, much of it debated by "experts" from a variety of scientific fields.  We don't have any believable answers, yet.  We need to keep searching for more information that will enable us to get closer to the truth.  We need to keep an open mind and attempt to fit all of the pieces of the puzzle together correctly. 

TPM

New Jersey Governor Chris Christie made a speech today and outlined a number of changes to entitlement programs including Social Security, Medicare, Medicaid and disability programs, http://www.cnn.com/2015/04/14/politics/chris-christie-new-hampshire-2016-elections/.  Governor Christie is getting a lot of attention for stepping forward and making substantive suggestions for bringing revenue and cost into balance for these programs. 

I wrote an article on Medicare and Social Security in 2006, http://www.thepurplemuse.com/id9.html.  I asked when would our politicians deal with the issues that were coming.  It is about nine years later and not much has happened.  Obamacare has added another level of entitlements on top of these programs without addressing the entire package of issues.  I give Governor Christie a lot of credit for addressing this issue in a very public manner prior to his decision regarding a Presidential run in 2016.  The longer we wait to fix the problems, the more difficult it will be and the greater impact it will have on the citizens that are directly impacted by these programs. 

I am not endorsing everything Governor Christie said in his speech today.  There are a number of ways to solve the problems.  However, I very much appreciate his efforts to bring this issue back to the spotlight it deserves.  Our elected representatives in the House of Representatives and the Senate need to address this issue and present a reform package to the President.  There is no reason to delay action any further.  The time for action is now. 

TPM

My wife and I spent Easter weekend for a family visit in New York, New York.  It has been several years since we have played tourist in our nations largest city.  The weather was pretty good and we were able to walk around a number of areas of the city.  Our hotel was in the Times Square area.  It was amazing to see all of the huge advertising video screens at night.  I haven't seen anything like it anywhere in the world.

We spent most of Saturday in the Battery Park area in southern Manhattan.  Damage from Hurricane Sandy is still be repaired or replaced with new and improved infrastructure. We walked around the new World Trade Center (Freedom Tower) and stopped at the new 9/11 memorial to pay our respects.  We visited Ellis Island for the first time after enduring a grossly mismanaged line management process.  It took over two hours from the time we bought our tickets until we stepped on the dock at Ellis Island.  Ellis Island was extremely interesting but the process of getting there was not good. 

On Sunday we walked through a good portion of the southeast section of Central Park including the Strawberry Fields area and we visited the American Museum of Natural History for several hours.  The Natural History Museum is fabulous.  I could have spent several days in the museum but instead we settled for some highlights. 

During our two days we also visited some of the smaller parks, Grants Tomb, parts of the path along the Hudson River, the Columbia University area and several local restaurants out of the tourist zone. 

New York is an amazing place.  It hard to understand how it all works, but one thing is for sure.  New York is a city that never sleeps.  Like the other massive cities on our planet the logistics of feeding millions of people and providing them the other necessities of life is an incredible challenge that is met every day of the year. 

New York is a great place to visit, but I wouldn't want to live there. 

TPM

I have previously commented on three books written by Gavin Menzies in the blog and articles of thepurplemuse.com.  Who Discovered America? - The Untold History of the Peopling of the Americas is Menzies's fourth book.  The book was published in 2013 with Ian Hudson credited as co-author.  In the Acknowledgments Menzies states that the book was revised nine times.  I think the book could have used a couple more revisions  to turn it into a more cohesive work. 

The book is a compilation of travel blogs, genetic study results and some new information that Menzies has accumulated since the publication of his first book 1421 - The Year China Discovered America.  One of the most interesting sections of the book concerns an area Menzies calls Nova Cataia (Cape Breton Island, Nova Scotia, Canada).  Menzies and others make the case that ruins of a Chinese settlement exist in this location.  After I finished the book I did some on-line research to find out if any work had been done on this topic by other experts.  Unfortunately, reputable experts on the area in question refuted the evidence Menzies's presents in 2006 with a substantive discussion that is more detailed than Menzies material!  Menzies did not say a word in his 2013 book concerning the challenges to his Nova Cataia theory.

Menzies has presented a tremendous amount of information in his four books that doesn't match up with the generally accepted history of the Americas.  Menzies has done all of us a great service with his efforts over many years.  One of Menzies strongest arguments is based on the history of maps.  I believe there is a lot more to the story of the world's most famous maps and much of that story is buried in the libraries and private collections of Europe and China.  It is my belief that mankind has been traveling on the oceans for thousands of years and that different areas of the Americas were visited or colonized many times before the Vikings or Columbus.  Most Americans know more about the European colonization of America than they do about the incredible history of earlier cultures of the Americas.  I believe their are linkages between early America cultures and the rest of the world that are not fully understood. 

It is possible that Chinese Admiral Zheng He did visit the Americas before Columbus but Menzies latest book didn't do much to help his case in proving it.  More work needs to done before we have a better answer to the question, Who Discovered America? 

TPM