Wednesday, April 10, 2019

You Don't Need a Weather Man

The 1965 Bob Dylan song Subterranean Homesick Blues contains the lyrics - you don't need a weather man to know which way the wind blows.

One year after that song was written large scale protests were occurring across the U.S. protesting the Vietnam War.

Two years after that song was written race riots destroyed parts of Detroit and other cities.

Three years after that song was written, Martin Luther King and Robert Kennedy were assassinated.

Four years after that song was written, 1969 was called the "year of bombings" by the New York Times in an article that stated,
"During a period of less than four months in the summer and fall of 1969, eight bombings rocked major institutions in New York City. While no one was killed, the bombings caused several injuries, jolted the city, damaged property and became symbols of the radical movements that were challenging the foundations of American society."
Five years after that song was written, Richard Nixon "circled the wagons", using leased city buses, to protect the White House from perceived threats of violence from protesters. Nixon had recently announced an escalation in the war in Vietnam with plans to invade Cambodia and four students had been killed and nine injured by Ohio National Guardsman on the campus of Kent State days earlier, so these were trying times for our nation.

Imagine a time when the president was so afraid of demonstrators that he would build a wall of buses to protect the White House. In hindsight this strange event with the buses seems rather benign but what might happen if enough people are fed up with the status quo?

No one knows the answer to that question of course but it's worth pondering.

As bad as things might be for the forgotten people of America what happens when some external event occurs that suddenly makes things much worse not just for them but for multitudes of citizens?


What sort of external event?

Either one of two things or some combination of those two will occur; we just don't know when.

1. Economic upheaval - this will be due to the latest bubble bursting which is a given considering laissez faire capitalism's history, or something more surprising like the dollar ceasing to be the world's currency.

2. Climate change will result in massive crop losses, fires, catastrophic weather events, and mass unplanned migrations. We've already seen the tip of that iceberg and it would be quite foolish to think there aren't worse effects in the not too distant future.

So what might happen if a lot of people are fed up with the status quo and then one or both of these external events occur?


In the years leading up to World War II the economies of the U.S. and Germany were suffering. As this article says -
The fragility of the existing order was exposed suddenly in 1929 by a severe economic crisis. The world economy had never returned to full health after 1919, but the buoyant American boom of the 1920s, fueled by expectations of a secure trading future, had masked the underlying problems. When the speculative share bubble broke on Wall Street in October 1929, the impact was catastrophic.
To cut to the chase we all know what happened...Germany chose Nazism and the U.S. chose FDR and the New Deal.

The point is that when you have a significant number of people experiencing economic distress and then some external event occurs that suddenly makes things much worse - no one knows what might happen.

How might history rhyme or repeat given the inequality, lack of opportunity, poverty and a dozen or so other metrics in which the United States is failing miserably over the last 30 years to meet the needs of a majority of citizens. If you'd like to delve into what these failures are, and how they were allowed to happen, I recommend reading the book American Amnesia - How The War On Government Led Us to Forget What Made America Prosper by Jacob Hacker and Paul Pierson.


Enter Ray Dalio. 

I'd never heard of Ray Dalio until B told me I should watch this 60 Minutes interview - Ray Dalio says wealth inequality is a national emergency.

If you're strapped for time just watch the part starting at 12:20. He says capitalism needs to be reformed, it doesn't need to be abandoned, it needs to be reformed in order to work better. He goes on to say that our current form of capitalism is not sustainable. We are at a juncture - we can reform it together or we will do it in a conflict between the rich and poor.

He goes on to say he thinks the probability of conflict vs. cooperative reform is 60-40 or 65-35. If we recognize we are at a juncture we can do some things to nudge the probabilities toward a peaceful resolution.

He's created quite a stir on some cable TV shows and internet sites with those comments. For anyone relatively unbiased who's been paying attention nothing he said was surprising. It's understandable it caused a series of apoplectic reactions in popular media given how biased much of the popular media is towards supporting the existing power structure and the dumbing down of complex topics to the point of meaninglessness. 

For example Joe Kernan on CNBC saying during the "debate" with Ray Dalio that, "all capitalism is - is the means of production in society are in the private sector - it's not state run." Apparently being unaware of the concept of a "mixed economy" Joe mumbles some more words including "creative destruction", "public school system" and "unions". It's a show, not a debate - the main point seemed to be to argue with some straw man anti-capitalist rather than actually have a dialogue with Ray Dalio. You hear and see this all the time when talking heads on TV or radio attack some fictitious stereotypical democrat, liberal, left wing socialist..whatever.

In addition to various interviews recently, Ray Dalio has written this piece about how and why capitalism needs to be reformed.


Almost twenty years ago I was involved in a labor dispute and our union was picketing corporate headquarters. It was a long day and people were tired when the Teamsters showed up, with a nicely painted big semi truck loaded with sound gear and speakers, and began playing a song which seemed really cool to me at the time. We were a bunch of nerds so no threat of violence. I'm not so sure it will be as cool next time...