One clear sign of the End Time is when the media starts publishing my opinions on the economy.


Worse yet, now I have to worry that, for the benefit of the world, Warren Buffett will send his goons to kill me. As long as I'm a dead man walking, I might as well make things worse before I go. Here now, more of my opinions about the economy.

I wonder what people mean when they say the economy will recover in 2010. The only way that can happen is if another irrational bubble forms thus creating an illusion of wealth similar to our previous illusions. If you take illusions out of the equation, there isn't anything to get "back" to. The wealth was never there in the first place.

I said before that I think we're on the cusp of a change as fundamental as the industrial revolution. But this time the change will be on the consumption side, not the production side. As a society we have dabbled with recycling and such, but it has always been fairly optional. There was no real penalty for waste.

The coming consumption revolution won't be strictly for the benefit of the environment. It will be an economic necessity, driven largely by the huge numbers of retired poor. There simply won't be enough stuff for everyone if waste is allowed.

The Internet will make this revolution possible. I've already written about the concept of ride sharing becoming widespread if the Internet and smart phones allow you to easily find rides going your way. That's just one example of how society could adapt to having less money without losing much in terms of happiness. Here's another example:

In California we're facing a severe budget deficit, and this will demand cuts in education among other things. I can imagine a future economy where everyone is home schooled over the Internet, and the average result is an improvement. With the Internet you could leverage the best teaching methods to the entire country. No one gets the bad teacher or the disruptive class. There are no bullies and no cliques.

Obviously you can see lots of problems with this approach. We assume that kids gain a lot from the social interaction of being in school. And of course personal attention from a teacher is important. But we have enough home schooled kids in the world to test that theory. My guess is that as long as home schooled kids have friends in the neighborhood, and siblings, they socialize just fine. The social skills can be learned on sports teams and at Girl Scouts. And I suspect a parent can give better personal attention than a teacher with 20 students.

Poor kids don't have computers and Internet connections. But subsidizing them would be far cheaper in taxes than sending them to school. And suddenly everyone would get the same quality of education.

I'm reading an excellent book called Outliers, by Malcolm Gladwell. One of the topics involves the huge academic disadvantage absorbed by kids who are the younger ones in a given class. Eleven months is a huge difference in maturity when you are in second grade. Home schoolers could start grades on their birthdays, and always be at the same maturity level as their peers. That change alone can buy you a big gain in average academic achievement.

Gladwell also discusses the disadvantage of having no school in the summer. It's a legacy of our farming past, with no current utility. Every summer the American kids lose ground to the Japanese kids who school year round. Home schooling would have no long breaks. Another problem solved.

This is the sort of change that could never happen if the economy was in a happy bubble and it seemed that money was abundant. But as the reality of our economic situation settles in, unthinkable options become thinkable. The good news is that the unthinkable options will have lots of advantages.

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Jan 7, 2009
"If you take illusions out of the equation, there isn't anything to get "back" to. The wealth was never there in the first place."

This is a very important point that I wish more people understood. The old way of doing things, where we make up money out of thin air and live the rich life by constantly swimming in vast amounts of debt is simply unsustainable. But the Federal Reserve is going to do its best to keep this system alive, because it's in their best interest. After all, it's made up of bankers. Clearly, they are the best people to run the nation's economy....

Jan 7, 2009
"There are no bullies and no cliques."

Didn't you write in your first book that "Everyone's a bully on the Internet"?
Jan 7, 2009
Everything I'm about to say is from a UK / European point of view. If I'm missing something big from a US point of view, I apologise.

So…. Home-based schooling sounds outstanding. For those able to work from home (increasing numbers), it would make perfect sense. For those NOT able to work from home, it would initially mean smaller class sizes for their kids.

I have always maintained that the best possible investment of money is that which is used to spend time with family and friends.

If we assume kids are allowed a certain amount of time off each year (say 40 days…? They are kids, after all!), then web-based home schooling will allow families to choose when and where they holiday. I'm not sure if it's the same in the US but when the school holidays arrive in the UK the prices of flights / hotels / holiday packages increase by at least 100%.

The thought of people being able to choose exactly when and where they holiday is very exciting. Instead of being forced into a 2-week beach holiday in Spain (Imagine spring break in Cancun. Mercy), families could make informed choices about travel and holiday. Whilst not ideal for everyone this would broaden people's horizons immeasurably.

This is my first post, I hope I've not broken any secret posting protocols.

Jan 6, 2009
Worried about Warren Buffet? I think the NEA just put you on their hit list. Home schooling over the internet? Bad teachers?
Expect a brick through your window sometime soon. Negative comments about education are not tolerated. Didn't you learn that when you were indoctrinated?
Jan 6, 2009
At the risk of sounding like Professor Pangloss...

I wonder what people mean when they say the economy will recover in 2010. ... The wealth was never there in the first place. --> They mean Americans will start producing more goods and services for each other and the world. You know, create wealth. Irrespective of how many paper dollars the Fed puts in or takes out.

But this time the change will be on the consumption side, not the production side. ... There simply won't be enough stuff for everyone if waste is allowed. --> Who defines what is waste? If I buy a hamburger and throw away half, am I wasting it? Or stimulating the economy by wasting my own money but giving it to the restaurant owner who can buy more from his supplier who can buy more from the farmer with the cow... you get the idea. Same goes for extravagant purchases by the rich, whose marginal utility is almost nil. Consumption drives production. Less consumption = less production.

I've already written about the concept of ride sharing becoming widespread... --> This is going backwards in terms of quality of life. You think people will or should give up their independence?

I suspect a parent can give better personal attention than a teacher with 20 students.... -> Well, except when both parents have to or want to work!

Eleven months is a huge difference in maturity when you are in second grade. --> I only have anecdotal "evidence" to counter this. In my class, the younger kids started out struggling in grades 1 and 2 but by the end of high-school (grades 11 and 12) they were actually doing better or same. Kids are resilient and rise to meet challenges without thinking about it.

Gladwell also discusses the disadvantage of having no school in the summer. ...Every summer the American kids lose ground to the Japanese kids who school year round. --> Ask yourself this. Would you live in a compressed tightly-wound society like Japan? America has its own problems but swapping them for problems that come from overstress is not wise either.

My 2 c. I always enjoy Dilbert!
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Jan 6, 2009
One way to encourage saving and discourage consumption is to replace the income tax with a consumption tax, such as the FairTax (www.fairtax.org). Under the FairTax plan, new goods and services would be taxed, but used goods are not. I think a great side effect of the FairTax plan would be to encourage reusing of goods rather than just throwing things away.
Jan 6, 2009
Oh, I get it. You are looking for the government and special interest to act logical. They, as you know, do not operate that way. Common sense, practical, functional, workable and simple are concepts not in their political mindset. Actually your ideas are a more realistic approach to the future but they will be belittled by the powers to be. The teachers and unions will do their best to sabotage the movement. You are fairly safe because of the high profile you present. They would not dare mess with your popular following. But it still would be wise to be careful. I for one think your mindset is great. Keep it up.
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Jan 6, 2009
I worry about the effect of some of your solutions - namely ideas like converting public education from bricks and mortar location to virtual locations only. Beside some of the more obvious problems with internet heavy solutions I also worry about anomie and quality of life.

Yes, the internet allows a lot of social interaction but is it of the same quality or even as beneficial as actual social interaction? To take a real life example many colleges used to have large anime clubs which met to watch anime and socialize as a group they however have been in decline since the internet made it extremely easy to get and watch anime alone. Although part of the gap in interaction has been filled in with forums it really isn't the same as an actual club and real life community. The real life comradely with all of its twists and turns and shared experiences that tends to make the experience valuable has been lost.

Now think of all the clubs, groups, et cetera that were tangential to your high school/college experience and all the experiences you may have had there - could they be reproduced over forums except as hollow shadows? Even bad experience are valuable for one's development as a person. Real-life doesn't have ignore buttons or filters so you have to learn to deal with the unpleasantness in life in a reasonable way instead of just isolating yourself. I think this has in particularly has led to disconnect in our political system with various sides only hearing the news and views they agree with combined with straw man views of the opposition.

An over reliance on the internet and other devices could turn us into paradoxical islands - isolated but surrounded by people - where we no longer care much about our neighbors or our local communities just the world that we see through our screen, darkly.

Keep in mind I'm not saying interaction over the internet is bad or isn't valuable just that there needs to be a balance. A single tree is just as valuable as the entire forest.
Jan 6, 2009
Yes, everyone will have to save more and spend less - mostly so we can be less selfish and be intergenrationally responsible (following from the WSJ):

"A recent NBER paper looks at why we and other developed countries stopped saving in the first place. The finding: "growing intergenerational selfishness" is partly to blame, authors Loretti Dobrescu, Laurence Kotlikoff and Alberto Motta wrote. "Developed societies are placing increasing weight on the welfare of those currently alive, particularly contemporaneous older generations," they wrote.

"... saving rates would have been either substantially or dramatically higher had American, French, and Italian societies not become so focused on immediate gratification," the authors wrote.

So let's hope the miserable economy once and for all cures intergenerational selfishness and obsessive focus on immediate gratification. It sounds noble but not much fun anymore.......

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Jan 6, 2009
Scott --

You have seen the future, and it ... was actually thirty years ago in Columbus, Ohio, 1977. It was a little experiment in education, called "school without schools".

The energy crisis, high fuel costs and cold weather resulted in public schools being closed for a month. Students met one day a week in a central location to turn in papers and get new assignments. Newspapers, radio and television stations all allocated space and time for disseminating material to displaced students.

I thought that it was an excellent experience. I had no trouble staying motivated and completing all of my work. Afterwards I wondered why all schools didn't follow the one-day-a-week model.

Jan 6, 2009
I agree with most of what Scott said with one exception. The disadvantages of being the youngest in a class. When I started school the requirement was that you reach the age of 6 prior to Dec. 31st. I have a late December birthday and was always the youngest in class. I got out of elementary school at 13 and graduated high school at 17. I even went my entire first semester in college before turning 18. I did well in school and was always in the upper percent, grade wise. Under current requirements the age range has been backed up to age 6 by Sept. 30th. I think this puts kids born late in the year at a disadvantage, not the other way around. I do realize that kids mature at different speeds and home schooling might actually be an improvement on the current system in this regard.
Jan 6, 2009
You know, I never thought about the impact of a late birthday on young kids in school, but your right. I've always felt like "the young kid" wherever I go, and I used to think it was because I was the youngest in my family, but now I'm wondering if it's also because I had one of the latest birthdays of anyone in my grade school class.
Jan 6, 2009

The one-parent-working scheme was an oddity of the 50s. The "system works" if that one parent is making an obscene amount of money, as many were at the time.

That's why it was called the "boom" years. The economy was pretty much kicking ass.

It wasn't like that _before_ the 50s either. It never really has been.

There's a reason we call pre-agricultural societies "hunter, gatherer" societies and not just "hunter" societies; even all the way back then, everyone worked.
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Jan 6, 2009
You are also in Barron's this week, but I don't think it's freely available. It was a decent article, but I'm not sure I learned anything new.
Jan 6, 2009
Paul Rivers,

I guess the adage, Those who do not learn from history, are doomed to repeat it, was lost on you in school was it? They weren't speaking of the course History, it talks about not making the same mistakes as the people before you. It would seem that George W. must have skipped that day in school too as he went back to fight the same war his daddy did and he's not faring a whole lot better.

Also, you stated that "Americans still have summer breaks from school because, unlike the Japanese, we still place great value on creativity and people need time to express and develop their creativity." If this is the case, why isn't the American workforce not given 2 months off every summer? Maybe all full-time working adults should have the same number of vacation days that they do in Sweden, or Germany? Why, because most Americans believe everything should be handed to them on a silver platter, that they are entitled to everything because they are Americans. It doesn't matter that the average American is under educated, after all, we still need someone to put salt on our french fries at McDonalds. Speaking of stupid people and McDonalds, if a stupid person spills hot coffee on their lap because they were too stupid to realize it was hot, they should not be rewarded with money from a lawsuit. They should have to go back to school to relearn hot and cold again, since they obviously don't grasp the concept.

Everyone else,

Since one parent would obviously have to stay home with the kid(s) so they can be homeschooled, this would mean a major shift in economics having only 1 parent working. Even if the home parent is telecommuting, their full attention would not be on the kids. Maybe divorces should be harder to get, or more expensive, or eliminate no-fault divorce, so people would think a little harder before getting married. I guess it would be a real crime to make sure that the couple could afford to have kids and one of them stay home before getting knocked up, but maybe that is asking too much. There would be the perk though, couples with kids, one parent stays home, couples without kids, both work and enjoy a more extravagant lifestyle as the result of 2 incomes. It seems to be a throwback to the 1950s, but if the system works???

Also, why not try giving the kids 1 week off every 2 months instead of 2 months in the summer as a trial run? If grades as a whole improve, make it 1 week every 3 months, more realistic to the workforce. Although I still say the homeschooling would work best.
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Jan 6, 2009
Hi scott.
Since you seem to be the harbringer of doom maybe you should check this out.
Jan 6, 2009
Hi Scott,

I was home schooled from kindergarten through high school. I was schooled year-round with vacations broken into week-long chunks rather than a summer-long stint. My mom used a curriculum designed by professional educators and I was given a standardized test by a licensed teacher every year to ensure that I was at or above the education level of my peer group.

We met with other homeschoolers for activities such as science fairs, biology projects, etc. Plus I had plenty of extra-curricular activities and neighborhood friends.

I started college when I was 15. Not because I was exceptionally smart but because I was able to go through school at my pace (in a classroom setting, my guess is that you can only go as fast as the slowest kid). Being homeschooled, in my opinion, was actually a great prep for college since the pace and self-study mentality are very similar.

Oh, and as an aside, I know of one charter high school here in Minnesota that offers students a free laptop, a stipend for Internet access, and a chance to earn their diploma completely on-line. http://www.minnesotavirtualhighschool.com/
Jan 6, 2009
When they say that the economy will recover in 2010 they mean that GDP will start to grow again, followed by lower unemployment. They don't mean that trillions of dollars of imaginary wealth will reappear - you must know this, since you have economics as a minor superpower.
Jan 6, 2009
Don't get your ego in a tizzy. Lacking a Bush-Blunder or a Cheney shooting, Mr Crippen was just having news writers block and needed to grasp at straws. His editor just wanted an article with two sorta big names in it.
Jan 6, 2009
Good post, Scott. ETFs are a good idea - far better than mutual funds.

Your projections on home-schooling are interesting as well, and very timely. However, there's something you should consider when holistically looking at how such changes would come to pass.

President Eisenhower, in his farewell address, warned the country against what he called the "Military-Industrial Complex." The left still focuses on this while ignoring the real government - industry cabal, to wit: the "Governmental - Governmental Union Complex" (yes, you may quote me with attribution when using this phrase).

A very good example of this is our very own (California) CTA, the California Teachers' Association. They have incredible power, and are one of the reasons we failed to get any real reform in our state. You may recall how much money they spent defeating all of Gov. Swarzenkennedy's ballot measures during our special election. They also contribute huge amounts to campaign funds, as do the other governmental unions, such as the Prison Guards' Union (extremely powerful).

Do you wonder why California's kids do so poorly in school? Because every time something like school vouchers comes up, they put millions into ads against it and it goes down in defeat. The politicians are scared crapless by these unions. Recently they even tried to outlaw home schooling by saying that only certified teachers could home school. That one got shot down by the courts and by the huge public outcry at the infringement on parent's rights and our liberty in general, but it came real close to happening.

If your predictions ever looked like they would catch on, you can rest assured that the CTA would, through their pet politicians, make sure it would somehow get outlawed. The government's associations with the unions in our state, and nationwide (look at the move to take away secret ballots in votes to unionize businesses - that one will happen with this new Congress) is one of the things we should most fear.

So don't look for a big move to home schooling. If it ever starts to happen in large numbers, they'll find a way to make it illegal. Welcome to the USSA.
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