Small Scale is “New Trend”(?)

June 18, 2013

The above-linked Reuters article is something I came across a couple of weeks ago.  It reports on a new trend in housing – “micro-apartments.”

Tiny apartments … are cropping up in major cities around the country to meet the demand of people who are short on cash but determined to live in areas with otherwise pricey rents.

They are “short on cash” because incomes are declining relative to housing prices.  They are determined to live in “areas with otherwise pricey rents” because that’s where the jobs are – in the cities.

Micros … usually offer less than 200 square feet including private bathrooms, and they typically come furnished, sometimes with built-in beds and other amenities to save space.  … Most feature a group kitchen that may be shared among eight units … Few come with parking

This isn’t a “new trend” at all.  It’s the process of population densification that’s inescapable when you continue to cram more and more people into the same space, as the U.S. (and indeed the entire world) is doing as our population grows ever larger. 

Think about what this is doing to per capita consumption of products.  Let’s use as a baseline the single-bedroom apartment I occupied when I took my first job after being discharged from the navy.  It was about 400 square feet.  It had a small kitchen, bathroom and living room, and closet space.  I had a designated parking space in a carport. 

The units reported on in this article are half that size.  So the per capita consumption of the materials used to construct the floor is cut in half.  Per capita consumption of materials used in the construction of the walls (lumber, drywall, insulation, paint, wiring and electrical fixtures) is reduced by 30% (assuming a square floor space).  If “group kitchens” are shared among eight units, the per capita consumption of ovens, kitchen sinks, refrigerators and small appliances is reduced by 87%.  Since “few come with parking spaces,” then, no doubt, the occupants rely on mass transit, or perhaps bicycles, and the per capita consumption of cars falls to near zero.

Take a walk through a Lowe’s or Home Depot and, as you do so, imagine the per capita consumption of each product that you see for people who live in these micro apartments.  Lawn mowers and other lawn and garden tools and products?  Zero.  Major appliances?  Zero.  Doors and windows?  Plumbing and electrical?  As close to zero as you can get.

This trend to smaller living quarters isn’t just isolated to a small slice of the population.  Aside from the wealthy few percent who have trended toward “Mc-mansions,” Americans’ dwelling spaces are getting smaller as land available for development dwindles.  Homes are smaller and are situated on smaller lots.  And those homes now house more people, as young people choose to stay with Mom and Dad later into their lives as their purchasing power shrinks relative to the cost of housing.

And that’s just homes and apartments.  Consumption of vehicles is declining as people are forced into more crowded city conditions where parking spaces are at a premium and streets are choked with gridlock.

But each one of these micro apartment dwellers goes to work each day and is even more productive than workers of the past.  And herein lies the problem.  It’s economically, physically and literally impossible for people to be more productive while consuming less and be able to maintain full employment.  Warehouses will eventually fill to maximum capacity as production exceeds sales, eventually leading to layoffs and growing unemployment. 

And what happens to per capita consumption then?  People who have lost their jobs consume even less, beginning a vicious cycle of falling consumption and worsening unemployment. 

The inverse relationship between per capita consumption and population density isn’t just a theory.  It’s real.  It’s happening, even in the U.S., once the land of wide-open spaces, but now where out-of-control immigration has turned us into an urban jungle and is fueling one of the fastest population growth rates in the world.  That this results in worsening unemployment isn’t just a theory; it’s more akin to a law of physics.  It’s inescapable.

Less consumption and living a simpler, more efficient life may seem to be a recipe for saving the planet, but it’s not.  The sheer volume of new consumers overwhelms any such savings.  Instead, it’s a ploy to make you feel better about the population growth that stokes sales volumes for corporations.  It’s a path away from a high standard of living and back to the poverty that mankind has worked so desperately to escape.

These aren’t difficult concepts, yet they continue to elude the field of economics.  The truth can’t be found if it lies in a place where you refuse to look, and the subject of population growth is one that economists fear above all others.

Another “New Normal” Jobs Report for May

June 13, 2013

Do you find yourself unemployed?  Or you’re afraid of losing the job you have?  Or your wages are stagnant because of the glut in the labor force?  Get used to it.  You’re living in the “new normal,” the by-product of globalism, founded on a 19th century trade theory that isn’t worth the parchment it was written on. 

On Friday the Bureau of Labor Statistics released the employment report for the month of May.  As employment reports go, it was a relatively good “new normal” report.  Predictably, the economy added enough jobs to keep pace with the growth in the labor force – about 175,000, and unemployment (the government-massaged U3 figure) ticked upward to 7.6%.  This is what counts as a “recovery” in the “new normal.” 

Since the bottoming of the “Great Recession” in spring of 2011, when a real measure of U3 unemployment (one that holds the labor force as a constant percentage of the growing population) hit 11.9%, unemployment has improved to 10.3% – that in spite of deficit spending of $900 billion per year and money-printing by the Federal Reserve of the same amount.  And the economy is actually slowing.  It used to be that, two years into a recovery, unemployment would be back down to 4-5%.  Today we’re more than double that figure. 

In May, the “detachment from reality” index, which measures the gap between official U3 unemployment and a figure that more accurately holds the labor force as a constant percentage of the population, ticked downward only slightly from April’s record level, as 420,000 workers who had mysteriously vanished from the labor force suddenly reappeared, swamping the 320,000 people who found work according to the household survey (another equally unbelievable figure).  Here’s a chart of the index:  Detachment from Reality Index.

The number of unemployed fell for the 2nd month in a row to the lowest level since October, but still stands at over 16.5 million:  Unemployed Americans.

Per capita employment rose for the 2nd consecutive month to its highest level since October:  Per Capita Employment.  Here, it’s important to note that the employment level reported in the household survey is lower than it was in November of 2008, in spite of the population growing by 10.4 million during those 4-1/2 years.  Not a single person added to the population since 2008 has joined the labor force to provide themselves a source of income.  A little hard to believe, isn’t it?  Someone explain to me how population growth has helped the economy.  None are joining the labor force, so none are contributing to the economic output and vitality of the country.  If they’re not working, then they’re on the public dole. 

And now Congress wants to exacerbate the situation by throwing the doors open to millions more immigrants.  Everyone who would like to volunteer to give up their jobs so that we can put them to work, raise your hand.  Anyone?  I didn’t think so.

Euro Zone Unemployment Hits New Record

June 1, 2013

As reported in the above-linked Reuters article, unemployment in the Euro zone hit a new record in April – 12.2%.  And that rate only begins to tell the story:

Almost two-thirds of young Greeks are unable to find work … in Italy, the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work

This should come as no surprise to anyone who understands the relationship between a high population density (the euro zone is nearly as densely populated as China) and low per capita consumption.  And per capita consumption and unemployment are inextricably linked. 

The reasons for Europe’s unemployment crisis are clear:

  • As anyone who has ever visited Europe knows, out of necessity, the vast majority of its people live in small apartments and consume very little, yet they are as productive as workers in the U.S.  High productivity and low consumption spell trouble for employment, and makes Europe utterly dependent on manufacturing for export to gainfully employ its vast labor force.
  • Following its ascension to the World Trade Organization over a decade ago, China has steadily “muscled in” on Europe’s export business.
  • For decades, Europe has relied heavily on deficit spending on social programs to prop up consumption and maintain an illusion of prosperity.  Their debt level has reached an unsustainable level,  and austerity programs have kicked government employees to the unemployment lines and falling incomes have bitten into Europe’s already-meager rate of personal consumption.

There is no escape from this trap that has been set by economists’ reliance on population growth to stoke macroeconomic growth.  Beyond the euro zone, unemployment around the globe will worsen as the world’s population continues to grow.  More and more nations turn to exports to bolster their economy while fewer and fewer net consumers remain.  How long will it be before this crisis begins to rip at the fabric of civilization?  It sounds like Europe may be approaching that point.

Unhappy? Move to a less densely populated state.

February 20, 2013

“CBS This Morning” reported on a survey done by the University of Vermont in which researchers searched “geo-tagged” twitter messages for words that were either “happy” or “unhappy” words, and then compiled the data by state.  Here’s a link to the results:

The colored map caught my population density-sensitive eye.  Knowing that the eastern U.S. is more densely populated than the western U.S., I was immediately suspicious that there may be a correlation.  It’s something I’ve suspected for a long time – that people living in crowded conditions are more unhappy – but I’ve never come across any hard data, until now.  (Although one could question just how “hard” the data is that’s gathered from a twitter survey.) 

So I plotted the data state-by-state vs. each state’s population density on a scatter chart to see if any correlation emerges.  Here’s the chart:  U of Vermont Happiness Index.  There’s a lot of scatter in the data but, once a trend line is calculated and plotted by the computer (in this case, a logarithmic trend line gave the best correlation) a relationship does emerge.  For this trend line, the correlation coefficient (R2) is 0.13.  A correlation coefficient of 1.0 indicates a perfect, straight line relationship while a correlation coefficient of 0.0 indicates that no relationship exists, as you’d find in a shotgun-like scatter of the data.  So the relationship is weak, but there’s definitely one there.  Densely populated states tend to be more unhappy while more sparsely populated states tend to be happier. 

No doubt, there are many other factors involved.  Southern states seem to be less happy.  Even though Texas is below the average population density, it ranks near the bottom of the happiness index.  Perhaps oppressive heat and humidity are factors.  Having lived for five years in the Houston area, I can tell you that it was definitely a factor for me.  (I felt like I was living in hell for much of the year.)  Houston is also among the worst in terms of air pollution and traffic congestion. 

California’s happiness index holds up quite well, in spite of its population density being well above average.  Perhaps its climate and beautiful geography tend to offset its overcrowding.  Lending support to that theory, it should be no surprise that Hawaii is the happiest state in the union. 

Alaska, the least densely populated state, falls somewhere around the middle of the happiness scale.  Perhaps the happiness that would otherwise be attributed to its sparse population is offset by its bitterly cold and dark climate for much of the year.  Or, perhaps the diminished opportunities for social interaction in an extremely sparse population actually becomes a negative factor.  That is, perhaps there’s a “sweet spot” in terms of the relationship between population density and happiness.

It also struck me how similar this map was to the electoral college map in the most recent presidential election.  Republican states also tended to be western states (with some exceptions, like California), while the Democratic states tended to be eastern states.  Does this mean that Republicans are happier than Democrats?  Maybe.  If you think about it, people who are better off financially tend to be more conservative and tend to vote Republican.  The Democratic states tend to be less happy.  Does this mean that President Obama was better than George Romney at tapping into unhappy voters?  Or do his policies play better to people in densely populated (and less happy) situations, who see more of a role for government in maintaining an orderly society?  But, then again, this may also tend to relate back to population density, since unemployment is higher in densely-populated areas. 

This is all a bit beyond the scope of my economic theory based on the very real and powerful inverse relationship between population density and per capita consumption, and I don’t want to make too much of what appears to be a weak relationship, but the evidence suggests that we all might be a bit happier if the U.S. was less crowded.

Immigration Reform and The “Stupid Party”

January 28, 2013

At a meeting of Republican leaders this past week, Louisiana governor Bobby Jindal told his fellow Republicans that the GOP needs to “stop being the stupid party.”  Jindal was referencing comments made by a few GOP candidates about rape and the party’s growing reputation as an anti-science party, thanks to pandering to far right elements that deny evolution and climate science.

But the Republican party holds no monopoly on stupidity.  I could cite a litany of stupid moves and policy positions on the part of Democrats, including trade policy, budget policy and foreign policy.  Among the stupidest of the Democratic positions is its advocacy for immigration reform.  How stupid is it to reward illegal aliens with amnesty and citizenship?  How stupid is it to swell our population yet again with another tidal wave of immigrants when all of the problems caused by overpopulation, driven almost entirely by immigration, grow worse by the day:  unemployment, overdependency on foreign oil and the deterioration in our climate, just to name a few? 

But there’s two kinds of stupid.  There’s real stupidity of the sorts mentioned above.  And then there’s political stupidity – the kind that involves not using the first kind to your advantage with the electorate.  It’s this latter kind of stupidity that Jindal and Republicans are contemplating.  In the case of immigration reform, Republicans seem to have concluded that, although the Democrats’ position on immigration is stupid, their position plays well with those elements of Latino voters who favor illegal immigrants over the best interests of their newly-adopted homeland.  So now, instead of trying to parlay their opposition to illegal immigration and amnesty for illegals into an advantage with the rest of the populace by making a better, more coherent argument for opposing illegal immigration, Republicans have decided it best to simply negate Democrats’ advantage with Latino voters by joining them in their stupidity. 

Yeah, yeah, I know – recent polls have shown that something less than 50% of voters now oppose a pathway to citizenship for illegals.  But not opposing it isn’t the same thing as enthusiastically favoring it.  If given a choice and if armed with intelligent arguments why our worsening overpopulation is a real problem, the vast majority of voters – perhaps even Latino voters – would prefer that we simply enforce the borders and force illegals back home. 

What’s really stupid is that we’ve made this mistake before and we’re about to do it again.  In 1986, Congress passed the “Immigration Reform and Control Act” which granted amnesty to millions of illegal immigrants.  The following were the key provisions of that Act:

  • required employers to attest to their employees’ immigration status.
  • made it illegal to knowingly hire or recruit unauthorized immigrants.
  • legalized certain seasonal agricultural illegal immigrants.
  • legalized illegal immigrants who entered the United States before January 1, 1982 and had resided there continuously with the penalty of a fine, back taxes due, and admission of guilt.

It was supposed to be a one-time deal and a permanent fix for the problem of illegal immigration.  Now according to an article just published this morning, here’s the framework of the “immigration reform” deal that Democrats and Republicans have struck in the Senate:

  • Creating a path to citizenship for illegal immigrants already here, contingent upon securing the border and better tracking of people here on visas.
  • Reforming the legal immigration system, including awarding green cards to immigrants who obtain advanced degrees in science, math, technology or engineering from an American university.
  • Creating an effective employment verification system to ensure that employers do not hire illegal immigrants.
  • Allowing more low-skill workers into the country and allowing employers to hire immigrants if they can demonstrate they couldn’t recruit a U.S. citizen; and establishing an agricultural worker program.

Point for point, it’s almost exactly the same as the “immigration reform” that was passed 27 years earlier, except that the provision for automatically awarding green cards to foreign students who earn degrees will make it that much harder for American students to find work, and that much harder for American students to afford seats at the universities that are increasingly taken by foreign students. 

Regarding the first point of the plan, there’s already a pathway to citizenship.  It involves going home and applying for a visa.  And we don’t need “immigration reform” to enforce the border and track people with visas.  Those are already provisions of existing law that merely lack the resources and funding. 

Regarding the 2nd point, a study just released this morning found that half of all Americans with college degrees are working in jobs for which they’re overqualified.  And approximately half of all recent college graduates can’t find work at all.  Why do we need to import more students?  How much more affordable would college be if our universities actually had to compete for students instead of filling the classrooms with immigrants?  How much could we cut federal spending on tuition aid?

Regarding the third point, we already have the E-verify system.  What we don’t have are states that require its use.

And regarding the last point, we already have this and employers routinely claim that they can’t find workers without even making any valid effort.

Immigration reform is stupid, plain and simple.  We already have all of the laws we need.  All we lack is the will to enforce them and the backing of economists who understand what worsening overpopulation does to our economy.  Swelling the ranks of the unemployed with more unemployed immigrants is stupid.  Making our over-dependence on foreign oil worse is stupid.  Negating all of our gains in energy efficiency and emissions by growing the population is stupid.  Filling our universities with foreign students we don’t need is stupid.  Destroying the credibility of our immigration laws with round-after-round of amnesty is stupid. 

What’s really stupid is ruining our economy and our country in an effort to court a minority of ill-informed voters, something that has never bothered the Democrats much.   And now  Republicans have concluded that if you can’t lick ‘em, join ‘em.  It’s easier than standing on principle.

Over-valuing Immigrants

January 24, 2013

This above-linked editorial appeared on Reuters a couple of days ago.  The topic of immigration “reform” (liberalization) has picked up a lot of steam since President Obama’s re-election, as Republicans have concluded that they need to out-do Democratic pandering to the Latino demographic (which both parties have stereotyped as valuing the importation of more Latinos over the interests of their newly adopted home) as their pathway back to the white house.  (By the way, I wonder how many Latinos are actually fooled into thinking that this push for immigration reform will actually benefit Latinos instead of opening the flood gates to a tidal wave of Chinese and Indian immigrants?)

The point of the editorial is to argue the merits of giving illegals a sort of “premanent noncitizen resident” status instead of a more difficult “path to citizenship.” 

But that’s not the point of this post.  What caught my eye is found near the beginning of this piece, a relatively new justification for growing our population:

“But first, it is important to understand why the immigration issue is gaining momentum. Back in 2011, J.P. Morgan released a report that found that U.S. households own $70 trillion in physical and financial assets. This same report found that America’s stock of human capital, i.e., the collective education and experience of all U.S. workers, amounted to $700 trillion. Rather than pouring hundreds of billions of dollars into new roads, bridges and housing units, the surest and cheapest strategy for increasing our collective wealth is to import talented workers.”

So J.P. Morgan (one of our nation’s “too big to fail” banks) is saying that each American is actually worth ten times the amount of tangible financial and physical assets they’ve managed to accumulate.  Sure, a tiny fraction of this can actually be measured in terms of the money that’s been spent on their education.  But the vast majority of this intangible “wealth” is obviously arrived at by assigning some dubious value to Americans’ “experiences.” 

If this were true – that each of us is far more valuable to society than our net worth indicates – then why is no one willing to pay for it?  U.S. households’ net worth of $70 trillion works out to about $500,000 per household, a figure that’s about four times as much as the median net worth, giving you some idea of just how much wealth is concentrated in the hands of the top one percent.  But never mind that; let’s say that your net worth is about $500,000.  J.P. Morgan’s report says that your real value to society is about $5 million. 

So why isn’t Canada offering each American $5 million to move there?  Or even $1 million?  I’d happily move there for that much.  Or, for that matter, why isn’t any country making such an offer? 

Why aren’t there corporate “breeding farms” where women can choose to be treated like animal breeding stock in return for being paid millions for each baby they produce?  A repugnant idea, to be sure but, no doubt, there’d be no shortage of women willing to sign up. 

Even if the J.P. Morgan report is correct – that people’s education and experience is worth ten times as much as their net worth – shouldn’t the real conclusion be that money spent on education and experience is largely squandered – that people shouldn’t bother with attaining an education because wages are too low to justify it?  If the 20 million unemployed Americans are worth so much, why is no one willing to hire them?  And why spend good money on an education, only to join their ranks?

The conclusion of this report is blatantly false, yet immigration advocates – those who stand to profit from growing our population – use it to their advantage.  As is true with any such study, one must consider the motivation of those who have funded or produced it.  What is J.P. Morgan’s real motivation for so blatantly over-valuing our collective education and experience?  It’s not the supposed $700 trillion in intangible  value to the economy that they’re interested in.  Rather, like any other bank, it’s the $70 trillion in real assets that they’re after, and they’d like to see that figure grow with the population. 

In 1976, the U.S. population was 218 million and the median family net worth was $113, 000 (in 2010 dollars).  In 2010, the population had grown by nearly 50% to 309 million, yet the median family net worth had fallen to $77,300.  But over the same time frame the average net worth rose from $184,000 to $499,000.  So, during that time frame, while the median American was worse off, the collective net worth (the amount that banks are involved in managing) rose dramatically from about $20 trillion to $70 trillion.  In other words, while the population grew, most Americans grew poorer while the banks grew much richer, especially as the top few percent of people grew much, much richer – profiting from the growth in the economy. 

But the poverty-inducing effect of worsening overpopulation is reaching higher into the ranks of top few percent.  From 2004 to 2010, even the average net worth declined.  That’s because of the Great Recession in 2008 and the plunge in home and stock market values, one might claim.  True, but was that contraction an anomaly or the bursting of a bubble built on debt to maintain an illusion of prosperity?  I’d contend it was the latter. 

To put it in simpler terms, banks – like all other corporations – profit from a growing macroeconomy that accompanies population growth.  But, because of the worsening unemployment and poverty that that growth brings, the fortune of average citizens gets worse.  But, if the banks can convince you and your elected representatives that growing the population faster – and liberalizing immigration is a good way to do it – is in your best interest (as it most certainly is theirs), then so much the better for them.

Poverty Fueled by Population Growth in the U.S.

December 21, 2012

The above-linked story was the feature article on Reuters yesterday.  It caught my eye because, though I now live in Michigan, Indiana was my home state.  The article uses the state of Indiana as a case study in the growth of poverty in the U.S.  It seems that Indiana has the second fastest-growing poverty rate in the country, second only to Nevada.  I suppose that the writers chose Indiana over Nevada for their case study since it better represents middle-class America, as opposed to a state whose economy is built around gambling and entertainment. 

It’s a very long, thorough treatise of the problem of poverty in America, but it’s this one sentence in particular that reall caught my eye:

The number of Americans below the federal poverty level – $22,350 a year for a family of four – hit 48 million in 2011, 17 million more than in 1989.

With this data, we can do a little math.  In 1989, the U.S. population was 247 million people.  At that time, the number of people living in poverty was 31 million (48 million minus 17 million).  That’s a poverty rate of 12.5%.  In 2011, the U.S. population was 310 million, and 48 million lived in poverty.  That’s a rate of 15.5%.

But consider this:  between 2011 and 1989, the U.S. population grew by by 63 million people, and 17 million have been added to the ranks of the poor.  That means that 27% of the people added to our population since 1989 are below the poverty level! 

The theory I presented in Five Short Blasts predicts that a growing population (once some critical level has been breached) will result in rising unemployment and poverty.  This piece of data corroborates that theory, and even I was surprised at just how rapidly it’s fueling the poverty rate. 

And, as the article points out, all of this is in spite of the fact that the federal government spent a record amount in 2011 to combat poverty.  Given the impetus to cut federal spending, what is the likelihood that this effort to hold back the tide of poverty can be sustained?  Only slightly better than the likelihood that it will address the real root cause of the problem.


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